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FOR  THE 
RAILROADS  ( 


FOR  THE 
RAILROADS 


"  TT  must  not  be  forgotten  that 
-*■  our  railways  are  the  arteries 
through  which  the  commercial 
lifeblood  of  this  nation  flows. 
Nothing  could  be  more  foolish  than 
the  enactment  of  legislation  which 
would  unnecessarily  interfere 
with  the  development  and  opera- 
tion of  these  commercial  agencies.  '^ 

PRESIDENT    ROOSEVELT 

IN    HIS    MESSAGETO    CONGRESS 
DECEMBER    3,  1901. 


FOR  THE 
RAILROADS 


WHEN  the  Esch -Townsend  bill 
was  passed  by  the  House  ot 
Representatives,  without  any 
real  discussion,  those  charged  with  the 
administration  of  the  railroads  of  the 
United  States  were  filled  with  apprehen- 
sion, for  it  was  evident  to  them  that  such 
a  law  would  surround  the  transportation 
industry  with  conditions  that  would  im- 
pair the  prosperity  of  the  communities 
served  by  the  railways  and,  as  a  conse- 
quence, affect  adversely  the  wages  of 
employees  and  the  returns  to  share  and 
security  holders. 

The  Esch-Townsend  bill  did  not  con- 
tain any  provision  to  prevent  rebates, 
discriminations  or  other  evils  of  which 
shippers  have  complained;  but,  by  giving 
to  the  Interstate  Commerce  Commission 
power  to  say  what  railway  rates  shall  be, 
would  have  created  a  system  directly  op- 
posite to  that  under  which  the  business 
men  of  the  United  States  and  the  railways 
have  worked  together  in  the  development 


FOR  THE 
RAILROADS 


of  the  industries  and  the  commerce  of  the 
different  sections  of  the  country  wherein 
their  respective  interests  lie ;  a  system 
under  which  the  rates  for  railway  service 
charged  in  the  United  States  have  become 
the  lowest  in  the  world  and  American 
railway  efficiency  has  attained  the  high- 
est standard. 

The  traveling  and  shipping  public  has 
not  asked  that  the  Interstate  Commerce 
Commission,  or  any  other  governmental 
agency,  be  endowed  with  rate-making 
power  but  the  demand  comes  from  the 
Commission  itself,  although  in  recent 
years  that  body  has  notoriously  failed  to 
enforce  the  laws  now  in  existence,  laws 
amply  adequate  to  remedy  any  actual 
abuses  and  to  punish  those  responsible 
for  them.  Whatever  general  support  the 
Commission  has  secured  is  due  to  the 
dissemination  of  misleading  arguments 
and  erroneous  statistics  such  as  those  con- 
tained in  the  report — Senate  Document 
257 — which  the  Commission  sent  to  the 
United  States  Senate  in  the  Spring  of  1904. 


'^^      FOR  THE 


RAILROADS 


K-t 


THIS  book  has  been  prepared  for  the 
railways  in  order  to  place  before  the 
people  of  the  United  States  some  of 
the  principal  facts  and  arguments  which 
demonstrate  the  gains  that  result  to  all 
producers  and  consumers  from  the  free 
action  of  commercial  forces  in  shipping 
and  transportation,  and  the  losses  that 
result  from  unwise  statutory  restrictions. 
It  is  not  intended  to  oppose  reasonable  and 
proper  legislation  for  the  suppression  of 
rebates,  unjust  discrimination  or  abuses 
of  any  kind  in  railway  rates  or  methods. 
Unless  otherwise  accredited  the  figures, 
statements  and  arguments  have  been 
compiled  and  formulated  by  the  under- 
signed. They  can  be  readily  verified  by 
anyone  who  will  consult  the  authorities. 
The  writer  will  gladly  comply  with 
requests  for  additional  or  more  detailed 
information  concerning  any  of  the  topics 
discussed. 

H.  T.  NEWCOMB. 


Address : 
H.  T.  NEWCOMB, 

Bond  Building, 
"Washington,  D.  C. 


RATES  WHICH  DO  NOT  AFFECT  RETAIL 
PRICES.  The  following  official  statistics  show  that 
with  regard  to  many  articles  of  traffic  the  rates  charged 
for  railway  transportation  are  so  low  that  they  can  not 
be  considered  in  fixing  retail  prices;  there  is  no  coin 
small  enough  to  measure  them.  Even  if  the  articles 
were  carried  free,  the  cost  to  the  consumer  would  not 
be  reduced,  since  the  saving  would  be  absorbed  by  the 
jobber  and  the  retailer.  The  table  presented,  shows 
the  rates  on  different  articles  and  the  recent  increases 
in  price,  irrespective  of  the  freight  rate,  which  has  not 
fluctuated  with  the  wholesale  selling  price: 


COMMODITIES 


FREIGHT 

RATES 

CHICAGO    TO 

NEW  YORK 


1897 


1905 


AVERAGE 

WHOLESALE 

PRICES 


1897 


1905 


Wheat,  per  bushel 

Corn,  per  bushel 

Oats,  per  bushel 

Flour,  per  barrel 

Mess  pork,  per  barrel. .  . 

Bacon,  per  cwt 

Lard,  per  cwt 

Butter,  per  pound 

Cheese,  per  pound 

Eggs,  per  dozen 

Beans,  per  bushel 

Apples,  per  barrel 

Sugar,  per  pound 

Coffee,  per  pound 

Tea,  per  pound 

Hay,  per  cwt 

Kerosene  oil,  per  gallon. 
Cotton  goods,  per  yard.. 
Woollen  goods,  per  yard 
Men's  shoes,  per  pair.  .  .  , 
Ladies'  shoes,  per  pair..  , 

Straw  hats,  each 

Hats,  derby,  each 

Potatoes,  per  bushel 


$0.1275 
0.119 
0.068 
0.27 
1.05 
0.30 
0.30 
0.0065 
0.005 
0.014 
0.16 
0.67 
0.0025 
0.0075 
0.0075 
0.25 
0.02 
0.0069 
0.0092 
0.0112 
0.01 
0.0025 
0.0025 
0.18 


$0,114 
0.1064 
0.068 
0.30 
1.05 
0.30 
0.30 
0.0065 
0.005 
0.014 
0.16 
0.67 
0.003 
0.0075 
0.0075 
0.30 
0.02 
0.0069 
0.0092 
0.0112 
0.01 
0.0025 
0.0025 
0.18 


,7437 
,2875 
22 
90 
25 
50 
30 
14 
08 
115 
90 
00 
03 
215 
215 
50 
06 
065 
6375 
00 
50 
00 
50 
25 


.08 

.575 

.345 

.00 

.37 

.12 

.40 

.21 

.095 

.20 

.10 

50 

.0375 
.225 

225 

675 

069 
.0787 

91 

50 

00 
.50 

00 

00 


*  Retail  prices. 


The  cost  of  freight  is  included  in  the  wholesale 
prices  quoted,  and  the  freight  charges  represent,  used 
as  they  are,  the  basis  upon  which  all  freights,  either 
east  or  west,  are  computed.  So  trifling  are  these 
rates  in  proportion  to  retail  prices  that  a  suit  of 
clothes,  hat,  dress  pattern,  pair  of  shoes,  pound  of 
coffee  or  tea,  box  of  cigars  or  bag  of  flour  costs  no 
more  in  San  Francisco,  Seattle,  or  Houston  than  in 
wSavannah,  Boston,  New  York,  or  Philadelphia. 

A  FOREIGN  VIEW.  "If  we  wish  to  seek  for 
models  of  railway  operations,  it  is  in  the  direction 
of  American  liberty  that  we  must  turn  and  not 
to  sterile  operation  by  the  State." — Pierre  Leroy- 
Beaulieu,  Les  Etais-Unis,  au  XXe  Steele  {The 
United  States  in  the  Twentieth  Century). 

ECONOMIC  FRICTION  IN  RAILWAY  BUSINESS. 

The  use  of  improved  machinery  in  all  lines  of  industry, 
which  began  in  the  earliest  years  of  the  nineteenth 
century,  has  wrought  an  industrial  revolution,  the 
changes  in  methods,  appliances  and  results  being  greater 
within  this  one  century  than  in  the  entire  preceding 
historical  period.  In  this  revolution  the  steam  loco- 
motive and  the  railway  have  been  the  most  salient 
and  the  most  important  factors.  From  the  close 
of  the  American  civil  war  to  the  present  time  indus- 
trial changes  have  been  more  rapid  in  the  United 
States  than  anywhere  else  in  the  world.  Within  this 
period  the  railway  system  has  grown  from  35,000 
miles  to  210,000  miles;  population  has  more  than 
doubled ;  wealth  has  increased  more  than  fourfold; 
populous  cities  and  sovereign  states  have  grown 
up  where  at  the  beginning  was  nothing  but  wilder- 
ness. Progress  of  similar  character  is  going  on  to-day 
with  undiminished  activity.  Railways  have  met 
this  progress  by  constant  adjustments  of  and  reduc- 
tions in  the  charges  for  their  services.     The  average 

10 


return  to  the  railways  per  ton  of  freight  carried  one 
mile  is  to-day  barely  one-third  of  the  return  secured 
in  1870  and  probably  less  than  one-fourth  of  that  ob- 
tained in  1860.  The  sweeping  changes  involved  by 
this  evolution  have  required  successive  adjustments 
and  readjustments  of  the  industrial  mechanism  and 
friction  at  every  stage  has  been  a  necessary  and  inevit- 
able incident.  It  seems  at  least  reasonable  to  suggest 
the  inquiry,  whenever  new  remedial  legislation  is  pro- 
posed, whether  the  particular  difficulties  of  adjust- 
ment in  connection  with  new  commercial  conditions 
which  it  is  intended  to  meet  are  not  likely  to  disappear 
with  a  continuance  of  those  conditions,  as  undue 
mechanical  friction  disappears  with  the  continued 
operation  of  the  machine  in  which  it  arises.  If  such 
is  the  case,  legislative  interference  is  not  only  danger- 
ous, but  is  certain  to  produce  more  harm  than  good. 

COMMERCIAL  FREEDOM  AND  RAILWAY 
RATE-MAKING.  Any  producer  can  fix  any  price  he 
chooses  for  the  commodities  he  creates.  The  penalty 
for  fixing  a  price  above  that  of  the  market  is  inability 
to  sell  and  consequent  commercial  failure.  Just 
as  to  sell  wheat  the  farmer  must  meet  market 
conditions,  so  in  order  to  sell  transportation  the  rail- 
way must  place  its  rates  at  figures  determined  by 
market  conditions.  The  real  function  of  rate-making 
officers  is  to  study  commercial  conditions  and  to  adapt 
their  schedules  to  those  conditions  so  that  the  rates 
they  contain  shall  actually  be  the  mathematical  result- 
ant of  the  particular  set  of  controlling  commercial 
conditions  to  which  they  are  subject. 

The  changes  in  the  conditions  of  production  and 
consumption  are  so  rapid  that  the  rate  which  was 
reasonable  and  just  yesterday  may  be  unjust  to-day, 
and    that    which    to-day    meets    the    difficulties    that 

11 


developed  yesterday  may  in  a  week  or  a  month  have 
become  as  defective  as  the  one  which  it  superseded. 
Thousands  of  railway  employees  scattered  all  over  the 
country  and  practically  familiar  with  the  industries  and 
needs  of  each  locality  are  to-day  devoting  their  time, 
their  energy  and  their  thought  to  the  perfection  of  the 
adjustment  of  railway  charges  to  the  conditions  of  the 
industries  which  the  railways  serve. 

In  giving  railroad  rate-making  power  to  a  govern- 
mental body,  at  least  three  great  impulses  toward 
railroad  efficiency  are  removed: 

1.  Ready  response  to  the  public  necessity  for 
meeting  competition  of  markets; 

2.  Ready  response  to  the  sensitive  conditions 
affecting  the  transportation  of  particular  products ; 

3.  Development  of  traffic  because  of  the  necessity 
of  increasing  tonnage. 

No  agency  of  Government  can  translate  commercial 
needs  in  terms  of  railway  rates  which  will  foster 
industrial  progress  as  does  the  free  operation  of  the 
natural  laws  of  business. 

There  are  many  examples  of  the  beneficent  conse- 
quences of  the  prompt  and  intelligent  adjustment  of 
rates  to  sudden  changes  in  industrial  needs  that  would 
be  impossible  under  Government  rate-making.  The 
failure  of  the  Hudson  river  ice  crop  during  the  winter 
of  1889-90  made  it  necessary  to  draw  on  sources  of 
supply  located  much  farther  from  consumers  than  ice 
can  profitably  be  shipped  at  normal  rates.  The  situa- 
tion was  presented  to  the  railway  company  over  which 
the  traffic  would  have  to  move  by  the  ice  companies 
concerned,  and  the  prompt  promulgation  of  very  low 
rates  saved  the  business  of  the  shippers  from  disaster 
and  the  consumers  from  an  ice  famine. 

A  great  western  railway  finds  it  expedient  frequently 
to  adjust  its  ore  rates  to  the  needs  of  producers  in 

12 


order  to  save  many  of  them  from  bankruptcy.  For 
example,  a  mine  located  on  a  railway  can  aflord  to  pay 
more  for  railway  transportation  to  a  common  market 
than  one  located  far  from  the  railway  and  forced  to 
provide  costly  wagon  transportation  before  the  rail- 
way is  reached. 

A  few  years  ago  an  entire  failure  of  the  Kansas  corn 
crop  threatened  the  cattle  feeders  of  that  region  with 
disaster  which  was  only  averted  by  prompt  action  by 
the  railways  in  putting  in  emergency  rates  so  low  as  to 
permit  drawing  upon  the  surplus  corn  crops  of  Iowa, 
Illinois  and  other  more  favored  portions  of  the  country. 

The  whole  development  of  manufacturing  industry 
in  the  regions  west  of  the  Allegheny  mountains  has 
been  stimulated  and  made  possible  by  the  prompt 
adjustment  of  transportation  charges  to  the  changing 
demands  of  an  intensely  dynamic  industrial  situation. 
By  this  means  the  economic  condition  of  an  area  of 
imperial  dimensions  has  been  changed  so  that  diversi- 
fied industries  furnish  a  stable  foundation  for  a 
population  far  more  numerous  and  prosperous  than 
exclusive  reliance  upon  agriculture  would  have  per- 
mitted. Yet  without  freedom  of  action  in  adapting 
rate  schedules  to  new  needs  or  under  any  form  of 
political  rate-making,  the  whole  western  portion  of 
x\merica  would  have  remained  exclusively  agrarian. 

From  Michigan  to  Louisiana  and  from  Texas  to 
Oregon,  the  rates  of  the  railroads  have  been  so  ad" 
justed  to  the  needs  of  the  shippers  of  lumber,  that  logs 
and  their  products  have  found  continually  extending 
and  increasing  markets.  The  citrus  and  the  deciduous 
fruits  and  canned  goods  of  California  find  through 
continually  lowering  rates  a  widening  market.  The 
sugar  beet  and  the  sugar  industry  of  Colorado  and 
California  could  never  have  been  placed  upon  a  paying 
basis   had   not  the   railroads   made  sacrificial   rates   in 

13 


,  the  interest  of  those  industries.  When  the  boll  weevil 
has  destroyed  the  cotton  crop  in  Texas  and  Louisiana 
the  railroads  have  instantly  made  very  low  rates  on 
cotton  seed  to  the  stricken  regions.  When  there  has 
been  over  production  of  potatoes  and  other  vegetables, 
apples  and  other  fruits,  melons,  rice,  and  other  com- 
modities, that  must  be  marketed  at  once,  or  perish, 
the  railroads  from  the  growing  regions  have  made 
rates  that  have  saved  the  producers  from  loss.  There 
is  not  a  coal  field  in  the  United  States  whose  operators 
have  not  time  and  again  called  upon  the  railroads 
serving  their  mines  to  grant  concessions  in  rates 
because  of  changing  market  conditions.  The  asphalt 
industry  of  Texas  and  California  was  built  up  by  the 
railroads  which  successively  lowered  their  rates  as 
prices  had  to  be  reduced  to  meet  competition  in  distant 
markets.  The  rates  on  brick,  stone,  cement,  and  other 
building  materials  are  in  a  state  of  continual  adjust- 
ment from  places  of  production  to  the  scenes  of  build- 
ing operations.  The  trade  of  the  United  States  with 
the  Orient  is  being  built  up  by  the  making  of  rates  to 
the  Pacific  Coast  that  allow  manufacturers  and  other 
producers  to  ship  their  merchandise  to  the  trans- 
Pacific  markets. 

One  of  the  countless  forms  of  this  means  by  which 
railroads  develop  traffic  occurred  not  long  ago  in 
Indiana.  A  resident  of  that  State  acquired  control  of 
an  invention  for  making  butter-dishes  from  shaved 
veneer  cut  from  timber.  It  was  discovered  that  sweet 
gum,  a  previously  worthless  wood,  was  best  adapted 
to  the  new  industry.  A  study  of  the  needs  of  the  new 
business  showed  that  to  enable  it  to  be  successful  a 
rate  25  per  cent  lower  on  this  timber  than  on  other 
kinds  was  necessary.  Such  a  rate  was  promptly  made, 
with  the  result  of  building  up  a  new  and  prosperous 
industry,  giving  employment  to  labor  and  capital  and 

14 


giving  value  to  a  natural  product  that  had  previously 
had  no  value.  Instances  of  similar  character  could  be 
multiplied  by  tens  of  thousands.  They  are  the  step- 
ping-stones by  which  America  has  attained  its  present 
industrial  supremacy. 

Such  rates  are  experimental,  and  they  are  invariably 
relatively  low.  No  company  could  afford  to  make 
them  the  standard  of  all  its  charges  or  to  put  them  in 
if  they  could  not  be  abandoned  should  the  business 
fail  to  develop.  No  Government  body  would  ever  order 
such  experiments,  or  could  justify  its  order  if  it  did, 
and  no  railway  would  or  could  afford  to  make  them 
if  a  rate-making  Commission  existed.  For  such  a 
Commission  would  surely  regard  them  as  the  strongest 
evidence  of  the  reasonableness  of  similarly  low  rates 
on  other  business,  for  which  no  such  commercial  justi- 
fication could  be  found.  If  the  people  of  the  United 
States  desire  a  continuance  of  the  marvelous  rate  of 
growth  of  the  last  three  or  four  decades  they  will 
naturally  continue  the  conditions  which  have  made  it 
possible. 

"WHAT  THE  TRAFFIC  WILL  BEAR."      The 

system  of  making  rates  to  develop  business,  or  of 
'  charging  what  the  traffic  will  bear,'  rightly 
applied,  has  been  the  means — and  we  shall  find  it 
to  be  the  only  possible  means — of  securing  efficient 
service  and  low  rates.  *  *  *  Charging  what  the 
traffic  will  bear  is  a  very  different  thing  from 
charging  what  the  traffic  will  not  bear.  It  is  a 
hard  principle  to  apply  intelligently,  but  when  it 
is  thus  applied  it  adjusts  the  burdens  where  they 
can  be  best  borne,  and  develops  a  vast  amount  of 
business  which  could  not  otherwise  exist.  *  *  * 
I'he  principle  of  charging  what  the  traffic  will 
bear  *  *  *  jg  unquestionably  the  principle 
which  enables  railroads  to  render  most  efficient 
service  to  the  community.  Still  clearer  is  it  that 
the  high  rates  are  not  to  be  regarded  as  a  tax 
which   could    be   removed   if  the   low   rates   were 

15 


abandoned.  *  *  *  A  system  of  rates  by  which 
each  article  pays  its  share  of  the  fixed  charges 
would  virtually  prohibit  the  movement  of  coal. 
*  *  *  It  is  clear  that  with  the  whole  power  of 
the  European  Governments,  the  laws  of  trade  have 
proved  too  strong  for  any  arbitrary  attempt  at 
railroad  regulation  to  succeed." — President  A.  T. 
Hadley,  Railroad  Transportation,  pp.  17,  76,  123 
124,  U(^,  248. 

RAILWAY  OFFICERS  WORK  FOR  SHIPPERS. 

Under  present  conditions,  the  subordinate  railway 
officers  who  deal,  in  the  first  instance  and  directly, 
with  the  shippers  who  seek  reductions  in  rates  fre- 
quently, if  not  generally,  assume  the  attitude  of 
advocates  of  the  changes  requested  by  the  shippers. 
These  officers  have  charge  of  the  traffic  of  limited 
regions,  and,  in  their  desire  to  establish  their  ability 
by  building  up  traffic  in  their  own  territory,  naturally 
fall  into  sharp  rivalry  wi^h  other  officers  of  their  Com- 
panies whose  duties  are  in  connection  with  the  business* 
of  other  communities  lying  on  other  portions  of  their 
lines  and  who  are  impelled  by  similar  ambitions  to  seek 
the  building  up  of  the  business  of  these  rival  communi- 
ties. Thus  all  these  officers  are  the  advocates  of  the 
shippers  whose  interests  are  so  closely  allied  with 
their  own.  This  identification  of  these  officers  with 
the  commercial  interests  with  which  they  directly 
deal,  has  proved  in  practice  to  be  a  powerful  means 
of   bringing  about   lower  rates. 

THE  LAW  OF  RATES.  ''It  is  frequently 
stated  that  there  has  been  no  system  in  the  making 
of  railroad  freight  rates.  But  there  is  a  law  upon 
which  they  are  constructed  that  every  traffic 
man  from  Maine  to  San  Francisco  knows  must 
be  observed, — rates  must  move  the  freight,  and, 
if  possible,  must  move  it  in  increasing  quantities." 
— Projessor  W .  D.  Taylor,  of  the  University  of  Wis- 
consin, Review  of  Reviews,  August,  1905. 

16 


LUCIUS  TUTTLE,  PRESIDENT  OF  THE 
BOSTON  AND  MAINE  RAILROAD.      'It  is  the 

business  of  the  traffic  manager  and  of  the  opera- 
ting manager,  in  making  arrangements  for  trans- 
portation, to  see  that  to  the  fullest  extent  possible 
within  their  power  the  customers  of  that  railroad 
within  its  territory  shall  be  able  to  reach  the  mar- 
kets of  the  world  at  the  lowest  possible  rates,  or 
at  such  rates  as  will  put  them  into  competition 
in  the  markets  of  the  world  with  the  manufact- 
urers producing  like  goods  in  widely  different 
sections,  perhaps  thousands  of  miles  away.''  State- 
ment before  the  Senate  Committee  on  Interstate  Com- 
merce, April  20,  1906. 

"TEMPERING  THE  WIND  TO  THE  SHORN 
LAMB."  ''The  phrase  'charging  what  the  traffic 
will  bear'  has,  for  some  not  very  obvious  reason, 
undoubtedly  acquired  an  ill  repute.  On  the  face  of 
it,  it  surely  seems  to  represent  a  principle,  not  of 
extortion,  but  of  moderation.  To  charge  what  the 
traffic  can  bear  is,  in  other  words,  not  to  charge 
what  the  traffic  cannot  bear.  *  *  *  The  real 
meaning  of  the  phrase  is  that,  within  the  limits 
already  described — the  superior  limit  of  what  any 
particular  traffic  can  afford  to  pay  and  the  inferior 
limit  of  what  the  railway  can  aft'ord  to  carry  it  for 
— railway  charges  for  different  categories  of  traffic 
are  fixed,  not  according  to  an  estimated  cost  of 
service,  but  roughly  on  the  principle  of  equality  of 
sacrifice  by  the  payer.  So  regarded,  'what  the 
traffic  will  bear'  is  a  principle,  not  of  extortion,  but 
of  equitable  concession  to  the  weaker  members  of 
the  community.  Had  railway  managers  in  the 
past  declared  that  their  principle  was  'tempering 
the  wind  to  the  shorn  lamb,'  their  descriptive 
accuracy  would  have  been  equally  great,  while 
their  popularity  might  have  been  even  greater. 
*  *  *  Translated  into  railway  language,  the 
principle  means  this:  the  total  railway  revenue  is 
made  up  of  rates  which,  in  the  case  of  traffic  unable 
to  bear  a  high  rate,  are  so  low  as  to  cover  hardly 
more  than  actual  out-of-pocket  expenses;  which, 
in  the  case  of  medium  class  traffic,  cover  both  out- 
of-pocket  expenses  and  a  proportionate  part  of  the 

17 


unapportioned  cost;  and  which  finally,  in  the  case 
of  high-class  traffic,  after  covering  that  traffic's 
own  out-of-pocket  expenses,  leaves  a  large  and 
disproportionate  surplus  available  as  a  contribu- 
tion towards  the  unapportioned  expenses  of  the 
low-class  traffic,  which  such  traffic  itself  could  not 
afford  to  bear.  This,  in  principle  and  in  outline,  is  the 
system  of  charging  what  the  traffic  can  bear.  It  is 
the  system  which — the  point  must  be  reiterated — 
is,  always  has  been,  and,  as  far  as  we  can  see,  always 
must  be  adopted  on  all  railways,  whether  they  be 
State  enterprises  or  private  undertakings.  It  is  a 
system  *  *  *  i^  the  interest  of  the  public, 
because  traffic  is  thereby  made  possible  which 
could  not  come  into  existence  at  all  if  each  item  of 
traffic  was  required  to  bear  not  only  its  own  direct 
expenses  but  its  full  share  of  all  the  standing 
charges.'' — W.  M.  Acworth,  The  Elements  of  Rail- 
way Economics ,  pp.  75-8. 

COMMERCE  SHOULD  BE  LEFT  FREE 
FROM  FETTERING  LAWS.  ''  Trade  is  no  longer 
limited  to  circumscribed  areas;  distance  hardly 
ever  bars  the  making  of  commercial  bargains 
between  widely  separated  parties,  and  almost 
every  article  of  commerce  finds  the  competing 
product  of  another  region  in  any  place  of  sale. 
The  consequence  is  that  products  of  the  farm, 
the  forest,  the  mill  and  the  mine  are  continually 
demanding  from  carriers  rates  adjusted  to  values 
in  particular  markets.  It  is  this  competition  of 
product  with  like  product,  of  market  with  market, 
that  has  induced  carriers,  in  their  eagerness  to 
increase  the  volume  of  their  traffic,  to  continually 
reduce  their  rates  to  market  points.  Such  com- 
petition is  the  competition  of  commerce  itself; 
the  strife  between  competing  industries  which  the 
public  interest  demands  should  be  left  free  from 
fettering  laws  and  uncontrolled  by  restraining 
combinations." — Extract  from,  address  of  Hon. 
Wheelock  G.  Veazey,  sometime  member  of  the  Inter- 
state Commerce  Commission,  Railway  Congress, 
World's  Columbian  Exposition,  June  21,  1893, 
Seventh  Annual  (1893)  Report  of  the  Commission, 
p.   219. 

18 


EXPERT  KNOWLEDGE  NECESSARY  IN  RATE- 
MAKING.  ''There  are  very  few  competent  judges 
of  proper  traffic  rates;  it  is  only  the  expert  who  can 
determine  what  they  should  be." — Mr.  Edward  P. 
Bacon,  Testimony,  Interstate  Commerce  Committee,  U.  S. 
Senate,  Vol.  I,  p.  21. 

COMPETITION  CONTROLS.  "I  believe  Mr. 
Hagerman  is  correct — that  wherever  you  can  show 
that  a  rate  is  the  result  of  competition,  that  is  the  best 
standard  of  its  reasonableness,  because  calculated 
upon  any  other  basis  the  factors  are  innumerable." — 
Mr.  S.  H.  Cowan,  Testimony,  Interstate  Commerce 
Committee,  U.  S.  Senate,  Vol.  I,  p.  112. 

INTRICACY    OF     RATE-MAKING.       Under    the 

law  which  has  been  in  force  since  1887  interstate 
railway  carriers  are  required  to  file  schedules  of  their 
charges  with  the  Interstate  Commerce  Commission. 
Under  this  law  no  less  than  300  separate  schedules  of 
rates  are,  on  the  average,  received  daily  in  the  office  of 
the  auditor  of  the  Commission,  many  of  these  schedules 
containing  hundreds  of  separate  rates  and  not  a  few  of 
them  thousands.  From  two-thirds  to  three-fourths  of 
these  new  rates  are  reductions  from  those  in  the  sched- 
ules which  are  superseded.  From  April  5,  1887,  to 
the  date  of  its  latest  (1904)  annual  report  the  Inter- 
state Commerce  Commission  received  2,358,960  rate 
schedules  and  the  present  annual  average  is  about 
100,000.  Under  date  of  January  19,  1905,  Mr.  Jesse 
M.  Smith,  auditor  of  the  Interstate  Commerce 
Commission,  wrote  to  Hon.  James  R.  Mann,  of 
Illinois,  a  letter,  in  which  he  gave  the  following  as 
the  numbers  of  separate  rate  schedules  filed  by  the 
railways  named  during  the  twelve  months  which 
ended  with  November  30,  1904: 

19 


RATE    SCHEDULES    FILED. 

NUMBER 

Pennsylvania  Railroad 4,123 

New  York  Central  and  Hudson  River  Railroad  1,561 

Illinois  Central  Railroad 6,344 

Chicago  and  Northwestern  Railway 2,178 

Chicago,  Rock  Island  and  Pacific  Railway. . . .  3,375 

Chicago,  Milwaukee  and  St.  Paul  Railway 2,591 

Baltimore  and  Ohio  Railroad 3,925 

Louisville  and  Nashville  Railroad 3,330 

Northern  Pacific  Railway 774 

Union  Pacific  Railway 789 

Wabash  Railroad 1,135 

Total  (eleven  railways) 30,125 

RAILWAYS  DO  NOT  CONTROL  RATES.   The 

tremendous  power  over  trade  and  commerce  involved 
in  fixing  railway  rates  is  now  neither  held  nor  exercised 
by  any  railway  ofl^icer  nor  by  all  of  the  railway  officers 
of  the  country  together.  No  check  is  more  real 
or  more  eff'ectual  than  that  imposed  upon  railway 
officers  by  commercial  competition.  No  railway  ever 
prospered  while  serving  unprosperous  communities. 
Producers  will  not  produce  and  consumers  will  not 
consume  at  localities  which  are  subjected  to  unjust 
prejudice  and  disadvantage  by  the  adjustment  of  rail- 
way rates.  The  present  body  of  railway  rates  has 
grown  up  out  of  these  conditions  and  subject  to  these 
checks.  American  industry  is  intensely  dynamic,  and 
the  changes  are  rapid  and  far-reaching.  Day  by  day 
these  changes  require  changes  in  rates,  and  so  long  as 
progress  continues  the  schedules  must  be  constantly 
altered  and  readjusted.  Thousands  of  railway  officers 
hold  daily  conferences  with  tens  of  thousands  of  ship- 
pers for  the  purpose  of  agreeing  upon  reductions  in 
rates.  A  recent  writer  on  this  question  was  perfectly 
accurate  in  saying,  in  regard  to  the  rate-making  power: 

20 


"Given  to  the  Interstate  Commerce  Com- 
mission it  will  not  have  been  transferred  from  the 
railways,  for  neither  singly  nor  collectively  can 
they  or  do  they  now  exercise  it.  It  will  have  been 
taken  from  the  public,  travelers,  shippers,  and 
railways  among  whom  it  is  now  diffused,  and  con- 
centrated in  the  hands  of  a  government  which,  by 
that  act  of  concentration,  will  be  made  the  most 
powerful  and  the  most  centralized  of  all  the  gov- 
ernments on  earth  from  the  earliest  dawn  of 
history  to  the  present  day.'' 

OFFICIAL  RATE-MAKING  IN  GEORGIA.     The 

experiment  of  Government  rate-making  has  been  tried 
in  Georgia  about  as  long  and  as  consistently  as  any- 
where. Yet  Georgia  shippers  are  not  satisfied.  Their 
attitude  is  well  expressed  in  the  following  extracts 
from  a  recent  editorial  in  the  Atlanta  Journal: 

"A  merchant  in  Marietta  can  ship  certain  goods 
to  Chattanooga  for  15  cents  per  hundred;  to 
Knoxville  for  19  cents  per  hundred.  To  ship  the 
same  goods  to  Atlanta  he  must  pay  30  cents  per 
hundred;  to  Macon,  70  cents  per  hundred.  Atlanta 
is  20  miles  from  Marietta,  Chattanooga  is  128 
miles,  and  yet  the  Chattanooga  merchant  pays 
just  one-half  the  freight  the  Atlanta  merchant 
does.  Why?  Because  Chattanooga  is  out  of  the 
State  and  Atlanta  is  in  it.  This  is  merely  one  of  a 
hundred  instances  where  Georgia  points  are 
placed  at  a  positive  disadvantage  in  freight  rates 
because  they  are  located  in  the  State." 

The  editorial  continues: 

"  When  a  merchant  approaches  the  railroad  for 
rates  in  Georgia  he  is  met  with  the  reply  that  the 
Railroad  Commission  regulates  that,  and  he  can  get 
no  reduction. 

"If,  however,  they  are  asked  for  rates  to  towns 
outside  of  Georgia,  the  application  receives  im- 
mediate and  favorable  consideration,  and  the  best 
rates  are  granted,  because  the  point  of  destination 
is  beyond  the  limits  of  the  State  and,  therefore, 
not  controlled  by  the  State  Commission." 

21 


In  another  paragraph  of  the  same  editorial  the  situa- 
tion is  summarized: 

''As  matters  now  stand,  the  plain  logic  of  the 
situation  is  that  within  the  State  of  Georgia,  rates 
being  regulated  by  the  Railroad  Commission, 
shippers  are  powerless  to  receive  fair  treatment 
from  the  railroads,  while  to  points  just  beyond  the 
limits  of  the  State  they  can  receive  the  most 
favorable  rates,  and  shippers  from  these  points 
into  the  State  receive  the  lowest  rate  that  can  be 
obtained;  much  lower,  as  a  rule,  than  the  Georgia 
shipper  can  get.'' 

In  the  case  of  the  interstate  rates  the  shippers  deal  at 
first  hand  and  face  to  face  with  the  railroads  and  their 
officers,  while  in  the  case  of  the  State  rates  the  legis- 
lature has  interposed  its  authority  and  that  of  the 
State  Commission  between  the  two  actual  parties  to 
every  contract  for  railroad  service,  thus  requiring  the 
negotiations  to  be  conducted  at  much  more  than  arm's 
length.  The  method  of  doing  business  thus  imposed 
upon  the  shippers  of  State  traffic  and  the  railroads 
carrying  it,  is  cumbersome  and  absurd.  It  is  only 
natural  that  its  consequences  should  be  burdensome. 

WHAT     HAS     HAPPENED     IN      CANADA. 

''Things  don't  always  pan  out  as  the  theorists 
think  they  will.  The  Government  of  Canada,  after 
operating  the  Intercolonial  Railway  for  years  at  a 
loss,  has  just  announced  an  increase  of  rates  all 
along  the  line,  to  the  disgust  of  persons  who 
imagine  Government  ownership  means  lower  rates. 
In  1904  every  dollar  of  earnings  cost  $1.14  in 
operating  and  maintenance  expenses  alone,  with 
no  interest  to  pay  on  an  $80,000,000  investment. 
Naturally  the  tax  payers  complain  and  make  it 
lively  for  the  ministry  who  find  it  impossible  to 
run  the  railroad  so  as  to  please  everybody.  On 
the  other  hand,  persons  living  along  the  Inter- 
colonial are  also  denouncing  the  Government  for 
increasing  freight  charges.  Referring  to  the 
experience  of  railroads  in  the  United  States,  the 

22 


Railway  Age  observes  that  'even  with  the  rates 
which  are  declared  to  be  excessive  a  majority  of 
the  railroads  in  this  country  have  been  bank- 
rupted; a  fractional  decrease  in  rates — so  small  as 
not  to  be  felt  by  shipper  or  consumer — applied  to 
the  principal  articles  of  freight  might  bankrupt 
many  roads  now.  If  Government  owned  the  roads, 
sweeping  reductions  would  be  demanded  by  every 
locality  and  interest,  and  when  the  earnings  got 
below  expenses,  the  experiences  of  Canada,  with 
its  unprofitable  railroad,  would  probably  be 
repeated  on  a  vastly  greater  scale.'  " — New  Haven 
{Conn.)  Journal  {Aug.  7.) 

THE  NATURAL  DECLINE  IN  RATES  STOPPED 
IN    ENGLAND    BY    LEGISLATION.      Mr.    W.    M. 

Acworth,  the  highest  English  authority  on  railway 
economics,  in  a  book  published  in  1905  (''The  Ele- 
ments of  Railway  Economics,''  Oxford,  The  Clarendon 
Press),  asserts  that  it  is  a  "point  of  serious  practical 
importance,"  to  be  considered  in  connection  with  the 
British  railway  legislation  of  1891  and  1894,  by  which 
Parliament  itself  undertook  to  fix  rates,  that  this 
legislation  "has  done  much  to  prevent  any  natural 
and  gradual  lowering  of  rates."  He  describes  the 
present  situation  as  follows: 

"A  railway  company  is  still  free  to  lower.  It 
has  ceased  to  be  free  to  raise.  A  manager  may 
desire  to  lower  a  rate,  hoping  thereby  not  only  to 
benefit  trade,  but  also,  by  increasing  largely  the 
volume  of  traffic,  to  increase  his  own  net  earnings. 
But  is  is  only  a  hope.  In  the  nature  of  the  case 
certainty  is  not  attainable  in  advance.  A  prudent 
manager,  therefore,  w^ill  not,  unless  his  hope  is 
closely  allied  to  certainty,  lower  a  rate  when  he  must 
face  a  lawsuit  before  he  can  put  it  up  again.  Still 
less  will  a  conference  of  managers^and  most  im- 
portant rates  affect  many  companies — allow  one 
of  their  number  more  sanguine,  or,  it  may  be, 
more  far-sighted,  than  the  rest  to  go  ahead  and 
make  experiments.    This  at  least  is  what  we  might 

23 


expect  a  priori.  Any  trader  whose  experience 
goes  back  to  the  years  before  Parliament  began 
carefully  to  regulate  railway  rates  in  the  interest 
of  trade  can  say  from  his  own  recollection  whether 
the  attitude  of  a  railway  manager  to  a  suggestion 
of  a  reduced  rate  is  nowadays  more  or  less  sym- 
pathetic than  it  was  thirty  years  ago." 
Mr.  Acworth  further  testifies  that: 

''The  law  of  undue  preference  in  the  hands  of  a 
court,  where  legal  rather  than  commercial  con- 
siderations necessarily  rule,  has  undoubtedly  also 
had  weight  in  putting  a  stop  to  the  isolated  and 
tentative  reductions  which,  when  cumulated, 
result  in  a  general  reduction  of  the  average  rate." 

In  principle  the  English  railway  laws  of  1891  and 
1894  are  similar  to  those  now  proposed  for  the  United 
States.  Naturally,  they  have  not  worked  satisfac- 
torily. At  the  solicitation  of  the  Senate  Committee 
on  Interstate  Commerce,  Mr.  Acworth  gave  the  Com- 
mittee a  statement  of  the  results  of  the  English  legis- 
lation, in  which  he  said,  in  part: 

"I  have  no  doubt  that  the  interference  of 
Parliament,  the  courts  and  the  executive  have  all 
intended  to  stereotype  and  keep  rates  at  an  un- 
necessarily high  level.  *  *  *  j  think  that,  so 
to  speak,  the  heart  has  been  taken  out  of  the  rail- 
way men.  The  railway  men  understand  this 
business  they  know  how  to  manage  it  in  their 
own  way.  The  railway  men  think  that  ''  responsi- 
bility has  ceased  to  be  ours  we  must  maintain  the 
statvs  quo/'  and  that  is  what  they  do.  *  *  *  x 
think  a  good  deal  of  our  regulation  *  *  *  is 
very  much  against  the  public  interest." 

EUROPE'S  LESSON.  ''Europe's  lesson  for 
the  United  States  is  that  any  thoroughgoing  and 
effective  effort  to  regulate  railway  rates  will  arrest 
the  decline  of  railway  rates,  will  prevent  the  rail- 
ways from  developing  a  volume  of  traffic  suffi- 
ciently large  to  justify  the  building  of  railways  of 
the  American  standard  of  efficiency,  will  check 
the  development  of  the  resources  of  the  country, 
and  will  demoralize  the  politics  of  the  country." 
— Professor  Hugo  R.  Meyer. 

24 


PROFESSOR  MEYER.  ''The  experience  of  all 
countries  that  have  had  a  generally  effective  regu- 
lation of  railway  rates,  whether  such  regulation 
was  exercised  by  Commission  or  by  means  of  State 
ownership  itself,  has  been  to  brmg  into  politics 
the  question  of  reasonable  rates  and  the  great 
question  of  conflict  of  sectional  interests,  which  is 
an  incident  necessary  to  the  development  of  a 
country,  and  the  ultimate  result  has  been  that 
raihvay  rates  have  become  inelastic  and  finally 
have  ceased  to  decline;  they  have  become  station- 
ary and  have  remained  so. 

''The  result  of  that  has  been  to  paralyze  com- 
merce to  a  very  large  extent,  the  railways  as 
effective  agents  for  the  development  of  commerce 
and  the  resources  of  a  country;  and  unless  there 
has  been  the  possibility  of  escape  from  that 
paralysis,  through  a  recourse  to  a  means  of  trans- 
portation that  was  abandoned  in  this  country  in 
the  seventies,  namely,  by  river  and  canal,  the 
effect  has  been  absolutely  disastrous." — Professor 
Hugo  R.  Meyer.  Testimony  before  the  Committee 
on  Interstate  Commerce  of  the  Senate,  May  ^,  1905. 

PRESENT  LAW  HAS  HINDERED  REDUCTIONS. 

There  is  a  good  deal  of  evidence  that  the  present  Inter 
state  Commerce  law  has  somewhat  retarded  the  natural 
general  decline  in  railway  charges.  This  law  was 
approved  by  President  Cleveland  on  February  4,  1887, 
and  became  effective  sixty  days  later.  Prior  to  that 
time  there  had  been  no  statutory  restrictions  upon  the 
charges  for  interstate  railway  services  and  no  Federal 
supervision  of  those  charges,  except  such  as  might  be 
exercised  by  the  United  States  courts  in  the  application 
to  interstate  commerce  of  the  principles  of  the  Common 
Law.  It  is  possible  to  make  important  comparisons 
between  the  average  railway  rates  and  other  significant 
factors  for  the  period  of  seventeen  years  since  the  enact- 
ment of  the  Interstate  Commerce  law,  and  those  of  the 
similar  period  immediately  antedating  its  adoption. 
These   comparisons    follow: 

25 


PERIOD  OF  FREEDOM 

ITEM 

1870-1874 

Increase  (*) 
1882-1886   1         or  de- 
crease (-) 

Tons  carried  1   mile  per 
mile  of  road 

333,799 

88.06 
99.04 

$5,093 
$1.59 
17.31 

I      Per  cent 
439,137           *31    F\f\ 

Average    train    load,    in 

tons 

Average  haul  per  ton,  in 

miles 

Freight  revenue  per  mile 

of  road  operated 

Revenue  from  each  ton 

moved 

Rate  per  ton  per  mile  in 

mills 

133.77 
113.40 

$4,629 
$1.23 
10.91 

*51.91 
*14.50 

-9.11 
-22.64 
-39.97 

PERIOD  OF  RESTRICTION 

ITEM 

1887-1891 

1899-1903 

Increase  (*) 
or  de- 
crease (-) 

Tons  carried  1   mile  per 
mile  of  road 

Average    train    load,    in 
tons 

Average  haul  per  ton,  in 
miles 

492,685 

169.22 

120.03 

$4,515 

$1.12 

9.37 

Per  cent 
760,828   1        *54.42 
280.53    i        *65.78 
131.25             *Q  a.'i 

Freight  revenue  per  mile 
of  road  operated 

Revenue  from  each  ton 
moved .  . 

$5,782 

$1.02 

7.45 

♦28.06 
-8.93 

Rate   per   ton   per   mile, 
in  mills 

-20.49 

The  results  of  the  comparisons  in  the  foregoing  table 
are  highly  significant.  Although  neither  the  decline 
in  the  average  payment  per  ton  nor  that  in  the  average 
payment  per  ton-mile  was  stopped  by  the  adoption  of 
restrictive  legislation,  the  table  shows  that  rates  moved 
downward  twice  as  fast  during  the  period  when  inter- 
state railway  commerce  was  wholly  free  from  statutory 
restriction. 


26 


POLITICAL  RATE-MAKING  IN  GERMANY.    An 

excellent  illustration  of  the  manner  in  which  political 
considerations  are  applied,  under  Government  rate- 
making,  to  the  determination  of  what  ought  to  be 
purely  industrial  problems  may  be  selected  from 
the  large  number  given  by  Professor  Meyer.  From 
1887  to  1891  the  rate  on  grain  over  the  German  Gov- 
ernment railways  from  the  farms  of  eastern  Prussia  to 
the  industrial  centers  along  the  Rhine  remained  at  1.557 
cents  per  ton  per  mile,  although  from  1888  the  agri- 
cultural interests  of  the  former  region  had  demanded 
a  substantial  reduction.  After  repeated  refusal  by  the 
Bureaucracy  the  crop  failures  of  1891  brought  about 
concessions,  made  in  the  especial  interest,  however, 
not  of  the  eastern  agrarians,  but  of  the  mining  and 
factory  population  of  the  Rhine  provinces.  Under  the 
reduced  tariff  there  was  a  rapid  augmentation  of  the 
grain  movement;  but  the  Government  of  Saxony  pro- 
tested that  its  farmers  and  millers,  being  located  half 
way  between  the  grain-growing  regions  of  eastern 
Prussia  and  the  Rhine  provinces,  had  a  natural  right 
to  supply  their  home  demand  for  grain  and  flour  and 
ought  not,  by  means  of  low  rates  over  the  Government- 
owned  railways,  to  be  subjected  to  the  competition  of 
the  farmers  and  millers  of  eastern  Prussia.  Similar 
complaints  were  lodged  on  behalf  of  the  farmers  and 
millers  of  Bavaria,  Wurtemberg,  and  Baden.  Finally, 
in  1894,  the  Governments  of  the  protesting  provinces 
notified  the  Prussian  Government  that  their  legislative 
representatives  would  not  vote  for  a  bill  authorizing 
a  commercial  treaty  with  Russia  unless  the  reduced 
rates  on  grain  were  discontinued.  In  response  to  this 
demand  the  rates  on  grain  were  put  back,  in  April, 
1894,  to  the  point  at  which  they  had  been  fixed  in 
1877.  The  natural  objection  of  eastern  Prussia  to  this 
restoration  of  the  old  rates  was  coupled  with  the  state- 

27 


ment  that  the  protective  duty  of  $8.75  per  ton  on  grain 
was  of  no  use  to  that  region  unless  its  inhabitants  were 
permitted  to  dispose  of  their  surplus  grain  in  the 
markets  of  Germany.  Thereupon,  finding  itself 
under  the  political  necessity  of  denying  them  rates 
for  transportation  that  would  enable  them  to  sell  their 
products  within  the  Empire,  the  Imperial  Parlia- 
ment took  the  only  action  which  was  left  to  it,  and 
gave  the  eastern  landholders  an  export  bounty  of 
$8.75  on  grain  in  order  that  they  might  sell  in  Great 
Britain  the  surplus  which  they  were  not  permitted 
to  i=ell  to  their  own  countrymen.  Under  this  law, 
in  the  year  1900,  the  eastern  Prussians  expoited 
327,000  tons  of  bounty-fed  wheat  and  rye,  while 
at  the  same  time  western  Germany  imported,  by 
sea  and  by  river,  2,700,000  tons  of  wheat  and  rye  on 
which  it  paid  a  duty  of  $8.75. 

MILEAGE  RATES  CONDEMNED.     "There  is 

nothing  that  will  be  more  deprecated  by  the  com- 
mercial organizations  of  this  country  than  the 
establishment  of  a  mileage  basis,  and  if,  in  their 
judgment,  the  proper  regulation  of  railway  rates 
were  going  to  result  in  that  I  believe  they  would 
withdraw  their  advocacy  of  this  legislation  as  a 
whole.  *  *  *  If  iiiQ  proposition  were  to  have 
the  Government  fix  all  the  rates  of  the  country,  as 
it  has  been  sought  to  be  made  to  appear  by  the 
opponents  of  this  legislation,  I  should  say  that  the 
inevitable  result  of  that  would  be  the  reaching  of  a 
mileage  basis.  If  the  Government  undertakes  to 
establish  the  rates  primarily,  it  must  reach  to  a 
large  extent  a  mileage  basis  of  establishing  those 
rates,  and,  in  my  judgment,  nothing  would  be 
.  more  detrimental  to  the  commercial  interests  of 
this  country  than  the  establishment  of  such  a 
basis.  *  *  *  " — ]\fir^  Edward  P.  Bacon,  Chair- 
man, Executive  Committee,  Interstate  Commerce  Law 
Convention,  Testimony  before  Committee  on  Inter- 
state Commerce,  U.  S.  Senate,  Vol.  Ill,  p.  1920. 

28 


AUSTRALIA'S  LESSON.  "Australia's  lesson 
for  the  United  States  is  the  visible  helplessness  of 
the  politician,  the  absolute  inability  of  the  politi- 
cian to  safeguard  and  to  foster  the  long-run  interest 
of  the  country  in  a  community  of  which  every 
section  has  become  demoralized  and  debauched 
through  an  extension  of  the  functions  of  the 
Government.  *  *  *  Australia's  lesson  is  that 
the  politician  in  charge  of  the  State  never  will 
be  permitted  to  become  a  business  man." — Pro- 
fessor Hugo  R.  Meyer. 

MISCHIEVOUS  MEDDLING,  BUT  WITH  GOOD 
INTENTIONS.  In  the  Freight  Bureau  cases,  which 
afterwards  went  to  the  Supreme  Court,  the  Inter- 
state Commerce  Commission,  on  the  complaint  of 
persons  engaged  in  business  in  the  cities 
of  Cincinnati  and  Chicago,  issued  an  order,  which, 
if  it  had  been  complied  with,  would  have  modified  the 
existing  relations  among  rates  to  substantially  all 
southern  points  of  destination.  It  would  have  decreased 
the  areas  within  which  certain  important  cities  like 
Chattanooga,  Atlanta,  and  Selma  could  do  a  jobbing 
business,  while  the  distributing  areas  open  to  other 
cities  would  have  been  correspondingly  increased.  It 
is  to  be  remembered  that  this  was  done  in  a  case  in 
which  the  interests  of  Chattanooga,  Atlanta,  Selma, 
and  the  other  cities  referred  to  were  not  represented 
before  the  Commission  and  had  no  opportunity  to 
introduce  testimony  or  argument.  Nor  is  there  a  line 
or  a  word  in  the  report  and  opinion  of  the  Commission 
which  indicates  that  it  had  found,  or  why  it  might 
have  found,  that  the  adjustment  of  rates  as  between 
these  destinations  was  unjust.  The  drastic  reductions 
ordered  in  this  case — as,  for  instance,  on  first-class 
freight  from  Cincinnati  to  Knoxville  from  76  to  53 
cents  per  100  pounds,  and  on  fifth-class  freight  between 
the   same   points   from   40   to    22    cents — are   striking 

29 


enough;  but  it  is  perhaps  even  more  significant  that 
the  Commission  saw  fit  to  break  up  the  long-estab- 
lished relation  under  which  Knoxville  and  Chattanooga 
had  enjoyed  equal  rates  and  to  accord  thereafter  a 
considerable  advantage  over  Chattanooga  to  the  City 
of  Knoxville.  Again,  the  class  rates  to  Rome  and 
Atlanta  had  been  the  same,  but  the  Commission  chose 
to  reduce  those  to  Rome  much  more  than  those  to 
Atlanta.  For  example,  the  first-class  rate,  which  had 
been  SI. 07  to  both  cities,  was  reduced  32  cents  at 
Rome  and  21  cents  at  Atlanta,  giving  Rome  an  advan- 
tage of  11  cents  per  100  pounds.  The  first-class  rates 
to  Anniston  and  Selma  had  been  $1.07  and  $1.08, 
respectively,  but  the  Commission  reduced  the  rate  to 
Anniston  to  86  cents  and  left  the  $1.08  rate  in  force  at 
Selma.  On  the  other  hand,  the  rate  of  $1.02  on  second- 
class  freight  to  Selma  was  reduced  to  92  cents,  while 
the  92-cent  rate  on  second-class  freight  to  Anniston 
was  reduced  to  73  cents,  the  reduction  in  this  case  to 
Anniston  being  19  cents  and  that  to  Selma  10  cents. 

SUMPTUARY  LEGISLATION  IS  NOT  NEW.   The 

legislative  bodies  created  by  English-speaking  peoples 
have  on  many  occasions  attempted  to  modify  by  statute 
the  natural  relations  of  trade  and  commerce.  When  the 
Black  Death  diminished  the  number  of  English  work- 
men and  wages  rose  so  that  land  owners  felt  an  unac- 
customed economic  pressure.  Parliament  sought  to  fix 
the  wages  of  labor  and  thus  to  deprive  workingmen  cf 
the  increased  earnings  which  the  market  justified,  but 
these  laws  only  furnished  an  instance  of  the  impotence 
of  man  when  he  seeks  to  repeal  or  modify  natural 
laws.  A  more  familiar  example  is  found  in  the 
almost  universal  effort  to  regulate  interest  on  loans; 
it  is  notorious  that  laws  against  usury  have  had  little 
effect  except  to  accentuate  the  burdens  of  borrowers. 
Such  laws  have  always  proved  ineffective,  and  usually 
whatever  they  have  accomplished  has  been  to  the 
detriment  of  those  in  whose  behalf  they  were  ostensibly 
enacted. 

30 


POLITICS    WOULD    SUPPLANT    ECONOMICS. 

To-day  the  rivalries  between  communities  are  com- 
mercial. The  controversies  which  they  cause  are 
prosecuted  along  commercial  lines;  the  contending 
parties  sustain  their  positions  by  commercial  argu- 
ments; and,  finally,  they  are  settled  by  the  natural 
operation  of  the  laws  of  trade.  It  is  proposed  to 
change  all  this.  There  may  be  no  distinct  purpose  to 
exclude  in  greater  or  less  degree  the  commercial 
considerations  which  now  govern,  but  experience  shows 
that  the  Interstate  Commerce  Commission  has  sought 
to  exclude  them,  and  no  sane  man  believes  that  a 
politically  created  body  will  ever  be  wholly  con- 
trolled by  nonpolitical  considerations. 

Is  it  not  possible,  even  probable,  that  in  spite  of 
impartial  purposes,  favor  will  be  shown  to  localities  in 
political  accord  with  the  Administration  or  party  in 
power?  Certainly  the  likelihood  of  such  unintentional 
bias  is  not  lessened  by  the  fact  that  the  members  of 
the  Commission  are  appointed  for  limited  terms, 
are  almost  certain,  to  desire  reappointment,  and  may 
be  ambitious  of  further  political  advancement. 

It  will  be  a  sorry  day  for  American  industry  when  the 
question  of  port  differentials  or  of  the  relations  among 
railway  rates,  anywhere,  becomes  in  reality  a  political 
question.  Do  the  people  of  the  United  States  wish  to  see 
the  great  parties  which  perform  such  useful  functions  in 
their  Government  divide  upon  the  question  whether 
wheat  shall  be  made  into  flour  for  the  use  of  eastern 
consumers  at  Minneapolis  or  at  Niagara;  whether  it 
shall  be  live  cattle  or  dressed  beef  that  is  shipped  east 
of  Kansas  City,  Omaha  and  Chicago;  whether  New 
Orleans,  Galveston,  or  New  York  shall  draw  tribute 
from  the  greatest  quantity  of  export  grain,  or  whether 
the  salt  produced  in  New  York  or  Michigan  or  Kansas 
shall  be  most  profitably  marketed  in  Iowa? 

31 


RAILWAY  CHARGES  NOT  TAXES.  To  attach  an 
unpopular  name  to  an  opponent  or  to  a  thing  attacked 
is  one  of  the  commonest  and  cheapest  tricks  of  dema- 
gogery.  Shallow  thinkers  and  those  who  take  their 
views  ready-made  are  easily  led  astray  by  the  misuse 
of  words,  names  and  maxims.  To  call  a  railway  rate  a 
tax  and  to  attribute  to  railway  corporations  the  pos- 
session of  the  taxing  power  is  to  designate  railway 
charges  by  the  term  applied  to  the  right  of  Govern- 
ments which  is,  in  practice,  most  universally  felt  and 
•  objected  to  by  the  governed.  A  tax  levied  by  Gov- 
ernment, if  moderate  in  amount,  may  be  tolerated 
although  the  tax  payer  is  prone  to  consider  it  as  a 
necessary  evil,  but  no  citizen  of  a  Republic  would 
regard  as  tolerable  for  a  moment  a  condition  under 
which  any  private  corporation  possessed  the  taxing 
power  or  any  portion  of  it.  Therefore  it  was  a  shrewd 
trick  on  the  part  of  the  advocates  of  railway 
regulation  at  the  beginning  to  adopt  the  policy  of 
speaking  of  the  ''transportation  tax"  and  repeatedly 
to  ascribe  to  railway  property  "the  power  to  tax  othei 
forms  of  property."  Of  ^course  no  one  who  accurately 
comprehends  the  meaning  of  the  word  "tax"  can  be 
misled  by  so  shallow  an  assumption.  A  tax  according 
to  the  greatest  of  modern  lexicographers,  Webster,  is: — 

"A  rate  or  sum  of  money  assessed  on  the  person 
or  property  of  a  citizen  by  government  for  the  use 
of  the  nation  or  state." 

The  definition  given  in  the  Standard  Dictionary  is 
similar,  viz.: — 

"A  compulsory  contribution  for  the  support  of 
govern  rnent." 

Such  payments  as  those  made  to  the  railways 
have  no  relation  to  taxes.  Taxes  are  involuntary 
payments,  railway  charges  are  voluntary  payments  ; 
taxes    are    limited  by  nothing    but    the   self-restraint 

32 


of  Government ;  railway  rates  are  closely  limited 
by  the  most  effective  form  of  competition,  that 
of  rival  producing  regions,  rival  routes,  rival  markets 
and  rival  groups  of  consumers.  It  would  be  quite 
as  reasonable  to  speak  of  the  "bread  tax,"  the 
''meat  tax,"  the  ''clothing  tax,"  the  "house  tax," 
or  the  "church  tax,"  as  of  the  "transportation  tax." 

THE  PUBLIC  GETS  THE  BENEFIT  OF 
IMPROVED  METHODS.  "In  many  other  lines 
of  business  the  capitalists  in  control  have  pocketed 
the  increase  in  the  receipts  produced  by  economies 
in  operation  and  manufacture.  But  in  the  railway 
business  freight  rates  have  been  so  administered 
that  the  public,  rather  than  the  capitalist,  has 
reaped  the  benefits  resulting  from  the  marvelous 
economies  that  have  been  developed  in  the  cost  of 
transportation.  It  is  true  the  railways  have  not 
done  this  in  a  spirit  of  philanthropy,  but  the 
public  benefit  was  none  the  less  for  that." — Pro- 
fessor W .  D.  Taylor,  of  the  University  of  Wisconsin, 
Review  of  Reviews,  August,  1905. 

RATES  PER  TON  PER  MILE.  The  ton-mile  is  the 
best  practicable  measure  of  the  work  done  by  the  rail- 
ways in  transporting  freight.  The  average  rate  of 
receipts  per  ton  pe^  mile  is,  therefore,  the  best  prac- 
ticable measure  of  the  general  level  of  railway  charges. 
The  following  table  shows  how  these  charges  have  been 
reduced.  The  rates  for  1870  and  1875,  years  in  which 
gold  was  at  a  premium  over  currency,  have  been 
reduced  to  their  equivalents  in  gold. 


AVERAGE    RATE    PER   TON   OF   FREIGHT   PEE 
UNITED  STATES. 

MILE   IN   THE 

YEAR 

RATE 

YEAR 

RATE 

1870 

1875 
1880 
1885 

mills 
18.89 
14.21 
12.32 
10.11 

1890 

.   1895 
1900 
1903 

mills 
9.41 
8.39 
7.29 
7.63 

Reduction  since  1870,  59.61  per  cent. 

33 


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35 


The  foregoing,  which  is  based  upon  data  reported 
by  the  Bureau  of  Statistics  of  the  Department  of  Com- 
merce and  Labor,  shows,  among  other  things,  that  in 
1903,  the  people  of  the  United  States  purchased  127 
per  cent  more  railway  freight  service  than  in  1890. 
Between  the  same  years  the  amount  of  money  in 
circulation  increased  66  per  cent;  the  capital  of  the 
national  banks,  16  per  cent;  Government  expenditures, 
83  per  cent;  the  value  of  foreign  trade,  48  per  cent; 
the  number  of  bushels  of  wheat  produced,  60  per  cent, 
and  the  tonnage  of  American  ships  on  the  Great  Lakes, 
79  per  cent. 

INCREASE  OF  HIGH  GRADE  TRAFFIC.  In  sub- 
mitting to  the  Senate  the  report  printed  as  Document 
No.  257,  the  Interstate  Commerce  Commission  at- 
tempted to  discredit  what  has  always  been  regarded 
as  the  most  satisfactory  available  standard  for  meas- 
uring the  trend  of  rates.    It  asserted  in  the  report  that: 

"  It  may  be  said  that  there  is  a  constant  tendency 
toward  an  increase  in  the  percentage  of  the  tonnage 
of  low-grade  freight,  so  that  if  there  had  been  no 
advance  in  rates  or  classification  since  the  year 
ending  June  30,  1899,  it  is  safe  to  say  that  the 
average  rate  per  ton  for  each  of  the  subsequent 
years  would  have  been  somewhat  less  than  for 
that  year." 

In  other  words,  the  Commission  claimed  that  the 
change  in  the  character  of  the  traffic  carried  between 
1899  and  1903  was  such  that  had  every  rate  schedule 
remained  as  it  was  at  the  beginning  of  the  period  the 
average  representing  receipts  per  ton  per  mile  would 
have  declined.  This  contention  is  important  if  it  is 
true;  if  it  is  untrue  its  fallacy  ought  to  be  exposed 
Its  weakness  will  be  apparent  at  once  to  anyone  at  all 
conversant  with  railroad  affairs  and  industrial  con- 
ditions. The  statement  shows  a  woeful  lack  of  knowl- 
edge of  what  was  going  on  in  business  affairs  from  1899 

36 


to  1903.  The  period  was  one  of  unprecedented  indus- 
trial activity  and  consequently  of  widely  diffused 
prosperity.  High-class  freight  consists  of  merchandise, 
manufactures,  and  miscellaneous  articles  and  com- 
modities high  in  value  but  small  in  bulk,  and 
therefore  able  to  stand  high  rates,  since  the  trans- 
portation charge,  even  at  such  rates,  can  constitute 
only  a  small  part  of  the  cost  of  the  goods  at  point  of 
delivery.  Dry  goods  is  one  of  the  items  of  high-class 
freight.  Manufactures  and  finished  goods  generally 
fall  in  the  same  category.  What  controls  the  A^olume 
of  the  shipments  of  these  goods?  The  demand,  of 
course,  and  this  demand  naturally  varies  according  to 
the  consumptive  requirements  of  the  population. 
These  requirements  in  turn  are  dependent  upon 
business  conditions — upon  whether  labor  is  fully  and 
profitably  employed  and  upon  w^hether  manufacturers, 
merchants,  and  producers  are  making  money.  During 
the  four  years  from  1899  to  1903,  all  classes  were 
extremely  prosperous.  Wage-earners  had  no  difficulty 
in  finding  employment,  and  many  worked  overtime. 
Their  rates  of  pay  were  increased  again  and  again — in 
fact,  they  could  demand  their  own  terms.  Manu- 
facturers turned  out  more  goods  than  in  any  previous 
similar  period  in  their  business  experience.  Merchants 
and  traders  increased  their  sales  correspondingly, 
while  the  farming  community  encountered  no  setback 
in  its  long  era  of  good  times.  In  brief,  everyone  was  in 
a  condition  to  buy  on  an  extensive  scale.  In  such  a 
state  of  things  the  percentage  of  high-class  freight 
shipped  over  the  railroads  could  not  decrease.  Is 
there  not  rather  every  reason  for  thinking  that  it 
would  necessarily  increase?  These  are  general  obser- 
vations, but  they  find  full  support  in  a  study  of  the 
statistics  available  for  that  purpose.  These  prove  that 
the  ton-mile  unit  is  moving  upward  rather  than  down- 

37 


ward  in  quality.  The  opinion  to  the  contrary  is  based 
primarily  upon  the  importance  of  mine  products  in  tie 
aggregate  tonnage  of  the  country.  The  notion  that  this 
great  class,  which  represented  51.47  per  cent  of  the 
country's  railway  traffic  in  1899  and  51.56  per  cent  \n 
1903,  is  carried  at  the  lowest  rates  is  not  supported  by 
the  facts.  One-fifth  of  it  is  anthracite  coal,  which  is 
charged  for  at  rates  that  considerably  exceed  the 
general  average  of  the  country,  while  more  than  a 
quarter  moves  in  those  portions  of  the  country  com- 
prised in  Groups  VI,  VII,  VIII,  IX,  and  X,  in  which 
traffic  conditions  still  require  rates  considerably  above 
the  average.  Generally  speaking,  the  classes  of  traffic 
which  move  at  the  lowest  rates  are  farm  products, 
including  both  vegetable  and  animal  products  in  that 
designation.  This  class  of  traffic  has  not  grown,  and  in 
the  nature  of  things  could  not  have  grown  with  as  great 
relative  rapidity  as  the  others.  ''  Products  of  agricul- 
ture" supplied  11.33  per  cent  of  the  railway  tonnage  of 
1899  and  but  9.56  per  cent  in  1903,  while  during  the 
same  years  the  proportions  supplied  by  "products  of 
animals"  fell  off  from  3.12  per  cent  to  2.63  per  cent. 
Manufactured  articles,  which  made  up  but  13.45  per 
cent  of  all  tonnage  in  1899  and  moved  at  relatively 
high  rates,  supplied  14.39  per  cent  of  the  total  in  1903. 
These  data  clearly  tend  toward  a  conclusion  diametri- 
cally opposed  to  that  claimed  by  the  Commission. 
Although  detailed  statistics  are  not  available,  the  well- 
known  fact  that  west-bound  traffic  has  since  1899 
grown  so  as  to  constitute  an  unprecedefitedly  heavy 
proportion  of  the  total  is  also  strong  evidence  in  the 
same  direction.  East-bound  movement  is  commonly 
of  low-grade  freight,  paying  relatively  low  rates;  west- 
bound movement  is  of  higher  grade  and  pays  relatively 
higher  rates.  Not  only  is  the  contention  of  the  Com- 
mission "not  proven,"  but  it  is  clear  that  the  ton-mile 
unit  was  of  higher  average  quality  in  1903  than  in  1890. 

38 


DECLINING  RAILWAY  FREIGHT  RATES.     The 

following  table  shows  the  average  gross  receipts  per  ton 
per  mile,  as  reported  by  the  Interstate  Commerce  Com- 
mission for  each  of  the  ten  geographical  groups  accord- 
ing to  which  its  railway  statistics  are  classified: 

RAILWAY    RECEIPTS    PER    UNIT    OF    SERVICE. 


I  Maine,  New  Plampshire, 
Vermont,  Massachusetts, 
Rhode  Island  and    C'on- 

necticut 

TT  New  Jersey,  Delaware, 
Maryland,  New  York, 
east  of  Buffalo,  Pennsyl- 
vania, east  of  Pittsburg, 
West  Virginia,  north  of 
Parkersburg 

III  New  York,  west  of  Buff- 

alo, Pennsylvania,  west 
of  Pittsburg,  Michigan, 
lower  Peninsula,  Ohio, 
Indiana 

IV  West    Virginia,    south    of 

Parkersburg,  Virginia, 
North  Carolina  and  South 

Carolina 

V     Kentucky,    Tennessee, 

Georgia,  Florida,  Alaba- 
ma, Mississippi,  Louisi- 
ana,   east    of    Mississippi 

River 

VI  Illinois,  Wisconsin,  Minn- 
esota, Iowa,  Missouri, 
north  of  St.  Louis  and 
Kansas  City,  South  and 
North  Dakota,  east  of 
Missouri  River,  Michigan 

upper  Peninsula 

VII  Nebraska,  Wyoming,  Mon- 
tana, North  and  South 
Dakota,  east  of  Missouri 
River,  Colorado,  north 
of  Denver 


REVENUE  PER  TON  OF 
FREIGHT  PER  MILK 


1890 


Mills 


18.73 


8.28 


6.95 


8.44 


10. Gl 


9.61 


13.60 


1895   I    1899 


Mills      Mills 


12.23     11.23 


6.98 


8.95 


9.61 


10.98 


5.82 


6.42       5.29 


6.70       5.94 


8.07 


8.21 


11.01 


1903 


Mills 


11  .67 


6.67 


6.07 


7.14 


8.27 


7.74 


9.80 


39 


RAILWAY  RECEIPTS    PER   UNIT  OF   SERVICE CONTINUED 


REVENUE  PER  TON  OP 

FREIGHT 

PER  MILE 

GROUP 

REGION 

1890 

1895 

1899 

1903 

Mills 

Mills 

Mills 

Mills 

VTII 

Arkansas,     Indian     Terri- 
tory,    Oklahoma     Terri- 
tory,   Kansas,    Colorado, 
south  of   Denver,  Texas, 
Panhandle,  New  Mexico, 

north  of  Santa  Fe 

11.52 

11.61 

9.68 

9.62 

IX 

Texas,  except  Panhandle, 
Louisiana,    west    of    Mis- 
sissippi River,    New  Mex- 

ico, north  of  Santa  Fe..  . 

13.03 

12.53 

10.65 

9.74 

X 

Washington,  Oregon,  Ida- 
ho,   California,    Arizona, 
Nevada,  Utah,  New  Mex- 

ico, western  portion 

16.51 

12.61 

11.36 

10.05 

The  United  States 

9.41 

8.39 

7.24 

7.63 

The  foregoing  shows  that  the  average  rates  were 
lower  in  1903  in  every  one  of  the  ten  groups  than  in 
1890,  that  they  were  lower  in  nine  groups  than  in  1895, 
and  lower  in  five  groups  than  in  1899. 

TRAFFIC  INCREASES  GREATEST  WHERE 
TON-MILE    RECEIPTS    ARE    HIGHEST.      Of    all 

traffic  changes,  those  in  the  territorial  distribution  of 
tonnage  movement  are  most  accurately  and  compre- 
hensively portrayed  by  published  statistics.  The 
Statistician  to  the  Interstate  Commerce  long  ago 
adopted  a  geographical  classification  of  the  data 
which  he  compiles,  and  the  averages  in  which  his 
conclusions  are  expressed  are  presented  for  each  of 
ten  great  divisions  of  the  country  as  well  as  for  the 
United  States  as  a  whole.  In  1899  there  were  three  of 
these  divisions  in  which  the  average  receipts  per  ton 
per  mile  were  lower  than  6  mills,  the  range  being  from 
5.29  mills  in  Group  III  to  5.94  mills  in  Group  IV.    The 

40 


owest  average  for  any  other  group  was  8.07  mills  and 
the  highest  11.36  mills.  The  average  for  the  entire 
country  was  7.24  mills,  the  lowest  of  any  year  in  the 
history  of  the  American  railway  system.  Figures  for 
the  year  1903  show  that  the  average  revenue  per  ton 
of  freight  per  mile  for  the  entire  country  was  7.63  mills, 
an  advance  over  1899  of  not  quite  four-tenths  of  a  mill. 
In  1899  55.45  per  cent  of  the  traffic  movement  of  the 
United  States  was  within  the  three  groups  where  rates 
were  lowest,  none  of  which  had  an  average  of  receipts 
per  ton  per  mile  as  high  as  6  mills.  From  1899  to  1903 
the  ton  mileage  of  the  country  increased  40.07  per  cent, 
and  of  this  great  increase  57.37  per  cent  went  to  the 
groups  in  which  the  average  in  1899  exceeded  8  mills. 
The  business  of  the  three  groups  having  low  rates  grew 
but  30.81  per  cent,  while  that  of  the  seven  higher  groups 
grew  very  much  more  rapidly,  or  actually  51.60  per 
cent.  Thus  changes  in  the  geographical  distribution  of 
traffic,  which  can  easily  be  traced  in  the  Commission's 
reports,  would  have  resulted  in  a  higher  instead  of  a 
lower  average  rate  per  ton  per  mile  ''had  there  been  no 
advance  in  rates  or  classification."  The  following 
table  shows  the  ton  mileage  of  each  group  for  the  years 
1899  and  1903,  with  the  percentages  of  increase: 

TON-MILEAGE. 


GROUP 

1899 

1903 

INCREASE 

I 

II 

Ill 

IV 

V 

4,111,621,534 

37,462,483,496 

25,075,322,381 

6,030,279,854 

8,547,922,813 

22,311,097,477 

3,467,159,799 

8,080,198,237 

3,740.142,138 

4,841,029.424 

5,114,609,555 
47,127,274,771 
34,804,198,236 

7,760,464,917 
13,174,890,160 
32.535,907,493 

5,842,151,338 
12,541,491,467 

5,595,345,082 

8,724,936,974 

24.39 
.   25.80 
28.80 
28.69 
54  13 

VI... 

45  83 

VII 

68  50 

VIII 

IX 

55.21 
49  60 

X 

80.23 

Total 

123,667,257,153 

173,221,278,993 

40.07 

41 


The  precise  influence  of  these  changes  in  the  geo- 
graphical distribution  of  tonnage  can  be  measured  by 
using  the  trafhc  movement  of  each  group  in  1903  as  a 
''weight"  to  be  applied  to  the  average  ton-mile  revenue 
of  the  same  group  in  1899,  and  thus  obtaining  a  weighted 
average.     Such  a  computation  is  shown  below: 


AVERAGE 

GROUP 

RECEIPTS 

PER  TON   PER 

MILE,    1899 

TOX-MILEAGE, 
1903 

PRODUCTS 

I 

II 

Ill 

IV 

V 

VI 

VII 

VIII...      . 

11.23 
6.82 
6.29 
5.94 
8.07 
8.21 

11.01 
9.68 

10.65 

11.36 

5,114,609,555 
47,127,274,771 
34,804,198,236 

7,760,464,917 
13,174,890,160 
32,635,907,493 

5,842,151,338 
12,641,491,467 

5.695,354.082 

8,724,936,974 

$  57,437,065 
274,280,739 
184,114,209 

,    46,097,162 

106,321,364 

267,119,801 

64.322.086 

121,401,637 

IX 

X 

59,590,621 
99,115.284 

United  States. 

7.24 

173.221,278,993 

$1,279,799,868 

In  order  to  ascertain  from  the  foregoing  what  would 
have  been  the  effect  of  the  changed  geographical 
distribution  of  tonnage  had  there  been  no  changes  in 
average  rates  within  the  different  groups,  it  is  necessary 
to  divide  the  total  of  the  last  column  by  the  total  of 
that  directly  at  the  left.  The  quotient  thus  obtained 
is  7.39  mills,  and  the  calculation  shows  that  0.15  mill 
of  the  rise  of  0.39  mill  from  1899  to  1903,  or  38.4G  per 
cent  is  accounted  for  by  mere  changes  in  the  geo- 
graphical distribution  of  traffic. 


REDUCTIONS  IN  THE  CLASSIFICATION  OF 
FREIGHT.  One  of  the  ways  in  which  reductions  are 
effected  is  by  moving  articles  from  higher  to  lower 
classes  in  the  freight  classification.  An  examination 
of  the  classification  changes,  from  1887  to  1902,  among 

42 


the  representative  articles  of  freight  selected  by  the 
Interstate  Commerce  Commission  for  illustrative 
purposes  and  given  in  its  ''Forty-Year  Review  of 
Changes  in  Freight  Tariffs,"  shows  that  out  of  847 
representative  commodities,  the  entire  number  shown 
by  the  Commission,  the  classification  of  254  articles,  or 
29.98  per  cent  was  reduced,  and  that  of  125,  or  14.76 
per  cent  was  advanced.  The  details  appear  in  the 
following  table: 

NET    CHANGES    IN    THE    CLASSIFICATION    OF    FREIGHT 

1887  TO  1902.* 


NUMBER 

OF  ITEMS 

CLASSIFICATIONS 

! 

Classified  Classified 

lower     i    higher 

in  1902  1  in  1902 

than  in   \  than  in 

1887     ;      1887 

Classified 

the 
same  in 
1902  as 
in  1887 

Total 
repre- 
senta- 
tive 
items 

The  Official  Classification . 
Less    than    carload    ship- 
ments  

Carload  shipments 

46 
75 

65 
30 

160 
168 

271 
273 

Total 

121 

95 

328 

544 

The  Western  Classification 
Less   than    carload    ship- 
ments  

Carload  shipments 

19 
45 

11 

12 

74 

47 

104 
104 

Total 

64 

23 

121 

208 

The    Southern     Classifica- 
tion  

69 

7 

19 

95 

Grand  total 

254 

125 

468 

847 

*  This  table  does  not  cover  all  items  in  the  various  classifications, 
but  only  those  selected  as  representative  by  the  Interstate  Com- 
merce Commission.  The  comparisons  relate  to  the  representative 
commodities  used  by  the  Commission  in  making  up  the  compara- 
tive tables  on  pnges  24  et  seq.  of  "A  Forty-year  Review  of  Changes 
in  Freight  Tariffs." 


43 


DEVELOPMENT    DUE    TO    RAILWAYS.      ''We 

may  boldly  say  without  the  railroads  three-quarters  of 
the  immense  territory  of  the  United  States,  situated  too 
far  from  the  sea,  and  having  insufficient  communication 
by  rivers  or  lakes,  would  be  still  almost  deserts,  and 
would  not  play  in  the  economical  Hfe  of  the  world  a 
more  important  part  than  Siberia  did,  for  instance, 
before  being  lifted  from  her  isolation  by  the  trans- 
Siberian  Railroad. — "From  Les  Etats-Unis  au  XXe 
Siecle  {^The  United  States  in  the  Twentieth  Century). — 
Pierre  Leroy-Beaulieu. 

WHEAT  AND  FLOUR  RATES  DECLINE.  Rates 
for  specific  services  and  particular  commodities  are 
constantly  being  reduced.  Nearly  all  of  the  three 
hundred  and  odd  new  rate  schedules  received  in  the 
office  of  the  Interstate  Commerce  Commission  on  every 
working  day  are  issued  to  report  reductions.  The  most 
important  single  rate  in  the  country  is  that  on  which 
grain  is  moved  by  the  all-rail  routes  between  Chicago 
and  New  York.  This  is  not  only  because  it  is  the  rate  be- 
tween the  greatest  grain  market  in  the  United  States  and 
the  most  important  port  through  which  grain  is  trans- 
shipped for  export,  but  because  the  Chicago-New  York 
rate  is  used  as  the  basis  of  other  rates  in  such  a  way 
that  any  change  involves  a  change  in  the  rates  applied 
to  substantially  every  bushel  of  wheat  sent  to 
market.  The  following  table  shows  the  average  annual 
rate  on  wheat  from  Chicago  to  New  York  via  the  all- 
rail  and  lake-and-rail  routes,  and  on  wheat  and  flour 
via  the  all-rail  routes  from  St.  Louis  to  New  York: 


44 


AVERAGE    RATES    ON    GRAIN    AND    FLOUR. 

{From  Statistical  Abstract  for  1903,  pp.  40S-409). 


Year 


^"^^^  I     Wheat 

Chicago  to  New  York,  St.  Louis  to 


per  bushel 


Lake  &  rail 


All  rail 


New  York 
per  100 
pounds, 
all  rail 


Flour 

St.  Louis  to 

New   York, 

per  barrel, 

all    rail 


1800 
1881 
1882 
1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 
1891, 
1892 
1893 
1894 
1895 
1896, 
1897, 
1898. 
1899, 
1900. 
1901. 
1902. 
1903. 


Cents 
15.7 
10.4 
10.9 
11.5 
9.95 
9.02 
12 
12 
11 

o8.7 
8.5 
8.53 
7.55 
8.44 
7. 

6.95 
7.32 
7.37 
4.96 
6.63 
5.05 
5.57 
5.78 
6.17 


Cents 
19.9 
14.4 
14.6 
16.5 
13.125 
14 
16.5 

al5.74 

014.5 
15 

14.31 
15 

14.23 
14.7 
12.88 
12.17 
12 

12.32 
11.55 
11.13 
69.08 
69.02 
68.75 
68.89 


Cents 
42 
32 
29.5 
33 
26 

22.14 
29 

32.13 
29.5 
28.5 
27.63 
29 

26.62 
28.5 
24.73 
23.57 
23 

23.64 
22.25 
21.95 
19.38 
17.33 
20.66 
21.50 


Cents 
84 
64 
59 
66 
52 

44.29 
58 

64.25 
59 
58 

52.63 
58 
58 
57 
50 
47 
46 
47 
45 


43.90 
38.76 
38.66 
41.33 
42.50 


a  Published  rates;   actual  rates  lower. 

6  For  export;   wheat  for  domestic  use  higher. 


"At  the  present  time  each  railroad  is  practically 
competing  against  the  whole  world  in  the  interest  of 
the  industries  on  its  line;  that  makes  those  industries 
compete  against  all  other  industries;  it  helps  the  pro- 
ducer and  helps  the  consumer,  and  makes  industrial 
combination  harder  than  if  things  were  centered  in 
fewer  localities,  as  they  would  be  if  the  Government 
tried  to  intervene  and  virtually  pick  out  what  territory 
each  industry  should  operate  in." — Walker  D.  Hines 
before  Senate  Interstate  Commeice  Committee. 

45 


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FARMERS'  SAVINGS  FROM  REDUCED  RATES. 

West  of  a  line  formed  by  the  western  shores  of  the 
Great  Lakes,  the  Illinois-Indiana  State  line,  and  the 
Mississippi  river,  every  one  of  the  groups  used  by  the 
Interstate  Commerce  Commission  for  the  classification 
of  railway  statistics  shows  a  marked  decline  in  rates 
from  1899  to  1903.  The  following  table  shows  for  each 
of  these  groups  and  for  all  of  them  together  the  differ- 
ence between  what  the  shippers  actually  paid  for  rail- 
way freight  and  the  higher  amounts  which  they  would 
have  had  to  pay  had  the  higher  average  rates  of  1890, 
1895,  or  1899  been  maintained: 


Group 

T       ffin       mnvfi'   i                     AMOUNTS    SaVED    IN    1903 

ment  in^903j        ^«  Compared  with  the  year- 

in    ton    milesi         ^ggQ         |         ^ggg 

1899 

VI 

VII 

VIII.... 

IX 

X 

32,535,907,493'   860,842,147 
5,842,151,338      22,200,175 

12,541.491,467      23,828,834 
5,595,354,082       18,408.715 
8,724,936,974      56,363,093 

$60,842,147 

6,893,739 

24,957.568 

15,611,038 

22.335,839 

$15,291,877 

7,069,003 

752,489 

5,091,772 

11,429,667 

Total.  . 

65.239,841,354  «181, 642,964 

$130,640,331 

$39,634,808 

>  The  great  agricultural  region  of  the  Mississippi  and 
Missouri  valleys  is  embraced  in  Groups  VI,  VII  and 
VIII,  while  Group  IX  includes  the  farms,  cotton 
plantations,  and  cattle  ranches  and  ranges  of  Texas. 
Group  X  includes  the  Pacific  Coast  states.  It  is 
especially  noteworthy  that  there  has  been  no  cessation 
in  these  important  regions  of  the  decline  in  railway 
charges,  even  as  measured  in  money  of  greatly  decreased 
purchasing  power. 

EFFECT  OF  THE  DECREASED  PURCHASING 
POWER  OF  MONEY.  Whether  railway  rates  have 
generally  advanced  or  generally  decreased  during  the 
years  from  1899  to  1903  and  thereafter  can  not  be 
answered  by  simple  comparisons  of  averages  expressed 

51 


ill  dollars  and  cents.  It  has  long  been  realized  that  any 
effort  to  study  the  question  of  wages,  throughout  an 
extended  period,  which  fails  to  take  into  consideration 
the  purchasing  power  of  the  money  received  by  the 
wage-earners  is  worse  than  valueless,  because  it  is 
deceptive  and  misleading.  It  has  been  generally 
recognized  also  that  any  effort  to  estimate  the  real 
income  of  particular  classes  of  producers  by  comparisons 
of  the  prices  obtained  for  their  products  at  different 
periods,  as  that  of  farmers  by  the  prices  of  corn  and 
wheat,  is  similarly  dangerous  unless  these  prices  are 
measured  by  quantities  of  commodities  which  such 
producers  must  purchase. 

President  Hadley,  of  Yale,  in  his  "Economics,"  says: 

"The  value  of  money  is  measured  by  the  quan- 
tity of  other  things  which  a  unit  of  money  will 
purchase.  It  varies  inversely  as  the  general  level 
of  prices.  If  general  prices  are  high,  a  given 
amount  of  products  or  services  will  cost  a  great 
many  dollars.  *  *  *  The  piece  wage  received 
by  any  workman  multiplied  by  the  number  of 
pieces  which  he  makes  in  a  day  constitutes  his 
day's  earnings  or  nominal  wage.  The  amount  of 
comforts  which  he  can  buy  with  the  money  re- 
ceived as  nominal  wages  represents  his  real  wage." 

The  most  important  fact  in  the  economic  historj^  of 
the  last  five  years  is  the  fall  in  the  value  of  money. 
On  this  account  all  nominal  prices,  wages  and  rates 
have  gone  up.  But  unless  a  particular  article  or  service 
has  gone  up  in  price  faster  than  the  general  average 
it  has  not  really  advanced  at  all.  The  slight  nominal 
advance  in  the  average  railway  rate  is  much  less  than 
the  general  average  advance.  Therefore,  as  is  shown 
in  following  paragraphs,  rates  have  really  gone  down. 

TYPICAL  RECENT  REDUCTIONS  IN  RATES. 

Among  recent  reductions  in  railway  rates  of  importance, 
made  under  the  action  of  commercial  forces,  is  that 

52 


of  the  rate  on  lumber  from  St.  Louis  and  Kansas  City 
to  St.  Paul  and  Minneapolis,  from  16  to  14  cents 
per  100  pounds.  Sugar  rates  from  the  Atlantic  seaboard 
to  the  Missouri  river  and  to  New  Orleans  have  been 
reduced,  and  so  have  those  applied  to  crackers  and 
other  bakery  products  throughout  the  entire  West.  The 
rates  from  the  Mississippi  river  to  points  in  Iowa  on  soft 
coal;  those  on  seed  wheat  for  the  farmers  of  Minnesota, 
Iowa,  and  Dakota;  those  on  wire  articles,  nails,  etc., 
from  Chicago  and  Milwaukee  to  the  Mississippi  river, 
and  those  on  grain  from  Mississippi  river  crossings 
to  points  in  Ohio,  Indiana  and  Michigan  furnish 
other  recent  examples  of  significant  and  far-reaching 
reductions. 

INCREASING  COST  OF  RAILWAY  OPERATION. 

In  1899  it  cost  $856,968,999  to  operate  the  railways  of 
the  United  States;  in  1903  the  same  expenses  amounted 
to  $1,257,538,862,  an  increase  of  $400,569,863.  In 
1899  railway  labor,  exclusive  of  salaried  employes, 
received  $481,264,109;  in  1903  the  same  classes  of 
labor  received  $720,580,923,  an  increase  of  $239,316,814. 
In  1899  the  fuel  used  by  locomotives  cost  $77,187,344; 
in  1903  it  cost  $146,509,031,  an  increase  of  $69,321,687. 
Comparing  operating  expenses  with  work  done,  it 
appears  that  in  1899  for  every  dollar  expended  for 
operation  the  railways  were  able  to  carry  17  passengers 
and  165  tons  of  freight  one  mile.  In  1903  the  passenger 
mileage  for  each  dollar  expended  in  operation  amounted 
to  16.6  and  the  freight  mileage  to  138.  Each  $1  of 
operating  expenses  in  1899  brought  in  $1.53  in  revenue, 
not  including  that  from  miscellaneous  services,  while 
each  dollar  of  operating  expenses  in  1903  brought  in 
only  $1.38  in  revenue.  The  decrease  amounts  to  sub- 
stantially 10  per  cent.  The  following  table  shows  these 
data  in  detail: 

53 


OPERATING    EXPENSES. 


1899 


1903 


Operating  expenses,  total.  .  .  . 
Business  done: 

Passenger  mileage 

Ton  mileage. 

Per  Si  of  operating  expenses: 

Passenger  mileage 

Ton  mileage 

Average  receipts: 

Per  passenger  mile — mills.  . 

Per  ton  mile — mills 


$856,968,999!      $1,257,538,862 


14,591,327,613 
141.599.157,270 

165 

19.781 
7.24 


20,915,762,881 
173,221,278.993 

16.6 
138 

20.06 
7.63 


Average    receipts    per    $1 
operating  expenses: 
From  passengers. 


of 


$0.34! 


$0.33 


From  freight 

1.19 

1  .05 

Total 

$1.53 

$1.38 

Decrease  of  10  per  cent 

Calculations  similar  to  those  just  given,  comparing 
the  efficiency  of  each  dollar  expended  for  wages  in  the 
years  1899  to  1903,  show  that  the  somewhat  higher 
average  rates  of  1903  produced  but  S2.48  for  each  dollar 
spent  in  wages,  while  in  1899,  each  dollar  spent  in  wages 
earned  $2.73.  The  decrease  again  amounts  to  sub- 
stantially 10  per  cent.     The  table  follows: 


WAGES    (not  including 
SALARIES.) 


1899 


1903 


Wages,  amount  of $481 ,264,109 

Passenger  mileage 14,591 ,327,613 

Ton  mileage 141.599.157,270 

Per  $1  paid  in  wages:  j 

Passenger  mileage 30 .3 

Ton  mileage 294. 

Average  receif)ts:  I 

Per  passenger  mile — mills. .  19 .78 

Per  ton   mile — mills 1  7.24 


Average  receipts  per  $1  spent 
for  wages: 

From  pas.se ngers 

From  freight 


Total. 


$2.73 


$720,580,923 

20,915.762,881 

173.221.278.993 

20.7 
246. 

20.06 
7.63 


$2.48 


Decrease  of  10  per  cent 


54 


Fuel  for  locomotives  represents,  next  to  wages,  the 
highest  siaigle  expenditure  for  railway  operation.  The 
efficiency  of  dollars  spent  for  fuel  has,  owing  to  the 
increased  cost  of  coal  and  other  fuels,  very  rapidly 
decreased.  The  following  table  shows  that  each  dollar 
thus  expended  produced  $17.02  of  revenue  in  1899  and 
about  30  per  cent  less,  or  $11.89  in  1903: 

COAL  AND  OTHER  FUEL  USED  BY  LOCOMOTIVES. 


1899 

1903 

Wages,  amount  of 

$77,187,344 

14,591,327,613 

141,699,157,270 

189 
1.834 

19.78 

7.24 

$146,509,031 

Passenger  mileage 

20,915,762,881 

Ton  mileage 

173,221,278,993 

Per  $1  worth  of  fuel: 

Passenger  mileage 

Ton  mileage 

Average  receipts: 

Per  passenger  mile — mills. . 

Per  ton  mile— mills 

143 
1,182 

20.06 
7.63 

Average  receipts  per  $1  worth 
of  fuel: 
From  passengers 

%  3.74 
13.28 

$  2.87 

From  freight 

9.02 

Total 

$17.02 

$11.89 

Decrease  of  30  per  cent 

NOMINAL  ADVANCES  IN  RATES  WERE 
UNAVOIDABLE.  Data,  taken  from  Government 
reports  of  unimpeachable  authority,  prove  that  the 
advanced  railway  rates  which  have  been  so  loudly 
exploited  are  increases  in  name  only.  There  have 
been  no  real  advances,  as  is  perfectly  clear  when  the 
lower  purchasing  power  of  money  is  taken  into  account. 
What  actually  happened  is  that  prices  of  commodities 
rose  so  rapidly  and  so  greatly  that  it  was  absolutely 
necessary,  in  order  to  avoid  railway  bankruptcy,  to 
adjust  charges  to  the  enhanced  cost  of  labor  and  sup- 
plies.    The  adjustment  was  somewhat  tardily  under- 

55 


taken  and  not  until  great  losses  had  been  sustained 
through  the  increased  cost  of  nearly  every  item  of 
labor  and  material  necessary  to  operation.  When  the 
changes  were  made  they  were  made  with  a  profound 
sense  of  the  delicacy  of  the  adjustment  of  business 
conditions  to  the  charges  established  in  the  schedules, 
with  full  recognition  of  the  fact  that  although  the 
scheduled  rates  may  be  reduced  they  are  unlikely  ever 
to  be  increased.  In  spite  of  the  pressure  of  increased 
wages  and  prices,  the  level  of  railway  rates  has  not 
moved  upward  far  enough  to  restore  its  old  relation 
to  the  general  level  of  either.  In  other  words,  the 
nominal  advances  in  railway  charges  did  not,  on  the 
whole,  make  up  for  more  than  a  small  and  insignificant 
proportion  of  the  advance  in  the  cost  of  labor  and 
supplies.  President  Hadley,  of  Yale  University,  a 
profound  student  of  railway  economics,  has  well  said: 

*'It  seems  also  clear  that  the  average  increase 
in  rates  is  apparent  only  and  not  real.  If  the 
price  of  goods  carried  and  wages  of  railroad 
laborers  and  the  cost  of  materials  of  railroad 
construction  and  operation  have  increased  from 
10  to  40  per  cent,  an  increase  of  apparent  charge 
of  5  per  cent  on  the  part  of  the  railroads  is  virtually 
a  tremendous  and  gratifying  decrease." 


"'The  highways  of  transportation  must  be  kept 
open  to  all  upon  equal  terms.'  On  that  basis  the  rail- 
way companies  are  ready  and  anxious  to  aid  and 
co-operate." — Samuel  Spencer,  before  Senate  Interstate 
Commerce  Commission. 


66 


"  If  there  are  unjust  and  unreasonable  rates  in  exist- 
ence, the  remedy  is  at  hand.  We  have  seen  that  of 
the  cases  which  have  gone  to  the  courts  not  one  single 
charge  of  unjust  and  unreasonable  rates  per  se  has 
been  sustained." — Samuel  Spencer  before  the  Senate 
Interstate  Commerce  Committee. 

PRICES  AND  RAILWAY  RATES.  Changes  in 
the  purchasing  power  of  money  have  been  scientifically 
investigated  by  many  students  whose  labors  cover  long 
periods  of  time  and  include  a  wide  range  of  commodi- 
ties, and  there  can  be  no  doubt  that  the  close  attention 
given  to  this  subject  has  resulted  in  methods  of  great 
accuracy  and  reliability.  The  United  States  Depart- 
ment of  Labor  under  the  direction  of  the  greatest  of 
statisticians,  Hon.  Carroll  D.  Wright,  has  established 
a  series  of  index  numbers  according  to  a  method  which 
he  developed  that  is  probably  the  best  and  the  most 
comprehensive  ever  continuously  applied  to  this 
problem.  The  method  employed  was  to  collect  large 
numbers  of  quotations  of  wholesale  prices,  which 
were  classified  in  certain  groups  and  averages  obtained 
for  each  group  and  for  all  the  commodities  represented. 
The  years  from  1890  to  1899  were  taken  as  the  basis 
and  represented  as  100  per  cent,  while  the  prices  of 
each  year  are  represented  as  percentages  of  the  bases 
thus  established.  Applying  the  same  method  to  the 
average  rates  per  passenger  per  mile  and  per  ton  of 
freight  per  mile  reported  by  the  Interstate  Commerce 
Commission  and  placing  the  results  in  juxtaposition 
with  the  index  figures  reported  by  Colonel  Wright,  we 
have  the  following  table,  which,  with  the  exception  of 
the  columns  showing  railway  rates,  is  precisely  as  it 
appears  in  Bulletin  No.  51,  of  the  Department  of  Labor: 


57 


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58 


The  foregoing  table  indicates,  with  regard  to  all 
commodities,  that  the  prices  in  1903  averaged  13.6 
per  cent  higher  than  the  average  prices  of  the  period 
from  1890  to  1899,  inclusive,  and  that  from  1899  to 
1903  there  was  an  increase  of  11.7  per  cent.  It  also 
shows  that  during  1903  rates  for  railway  passenger 
service  were  2.5  per  cent  lower  than  the  average  of 
1890  to  1899,  and  those  for  railway  freight  service  9.1 
per  cent  lower.  From  1899  to  1903,  while  the  general 
average  of  commodity  prices  rose  11.7  per  cent  rail- 
way passenger  rates  rose  1.4  per  cent  and  freight  rates 
rose  5.3  per  cent.  In  other  words,  the  amount  ob- 
tained by  selling  the  same  quantities  of  commodities 
in  general  would  buy  more  transportation  of  either 
freight  or  passengers  in  1903  than  it  would  in  1899,  or, 
to  reverse  the  form  of  the  statement,  a  particular 
amount  of  railway  service  would  buy  less  in  commodi- 
ties in  1903  than  in  1899. 

"  The  low  rates  made  by  American  railroads  are  the 
surprise  and  wonder  of  foreign  railroad  men,  averaging 
not  more  than  one-third  to  one-half  of  the  rates  for 
similar  services  in  other  countries  under  Government 
control  and  ownership.  The  foreign  railroad  officials 
who  have  studied  this  subject  here  credit  these  low 
rates  to  the  sharp,  intense  competition  between  rail- 
roads having  individual  liberty  of  action  and  desire  to 
build  up  new  territories,  forcing  the  managers  and 
heads  of  departments  to  an  intensity  of  research, 
investigation  and  development  of  economies  in  cost 
of  service  unheard  of  in  countries  where  the  railroads 
are  owned  or  controlled  by  the  Government.'' — 
Joseph  Ramsay,  Jr.,  before  Senate  Interstate  Commerce 
Committee. 


59 


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64 


WHEAT  WILL  BUY  MORE  RAILWAY  SERVICE. 

The  farm  prices  used  in  the  following  table  are  those 
reported  by  the  United  States  Department  of  Agri- 
culture (Year  Book  1903,  p.  601)  and  the  average 
rates  per  bushel  on  wheat  shipped  from  Chicago  to 
New  York  over  the  all-rail  routes  are  those  shown  in  the 
Statistical  Abstract  for  1903  (pp.  403  to  409)  follows! 

WHEAT   RATES    AND    PRICES. 


Year 


Average  farm 

price  per 

bushel 


Average  rate 

per  bushel 

Chicago  to  New 

York,  all-rail 


Number  of  bushels 

transported  from 

Chicago  to  New  York 

for  the  price  of  one 

bushel 


1899... 
1900..  . 
1901..  . 
1902..  . 
1903..  . 


Cents 
58.4 
61.9 
62.4 
63 '.0 
69.5 


Cents 
11.13 
9.09 
9.02 
8.76 
8.89 


5.25 
6.82 
6.91 
7.20 
7.82 


It  appears  from  the  foregoing  that  the  price  of  wheat 
was  lower  in  1899  than  in  every  one  of  the  four  years 
which  followed,  and  that  the  railway  rate  charged  for 
moving  a  bushel  of  wheat  from  Chicago  to  New  York 
was  higher  in  1899  than  in  any  succeeding  year.  Com- 
paring farm  prices  with  rates,  it  appears  that  one 
bushel  in  every  5}4  was  required  to  pay  the  cost  of 
transportation  from  Chicago  to  New  York  in  1899, 
while  in  1903  one  bushel  would  pay  the  cost  of  trans- 
porting more  than  7^  bushels. 


65 


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66 


A  DAY'S  LABOR  WILL  BUY  MORE  RAILWAY 
SERVICE.  The  purchasing  power  of  labor  in  general 
is  indicated  by  the  following  table,  in  which  the  statis- 
tics of  wages  are  from  the  reports  of  Commissioner  of 
Labor  Wright: 


GENERAL  WAGES  AND  RAILWAY  RATES. 

WAGES 
PER   HOUR 

MILES       OF       RAILWAY        SER- 
VICE    PURCHASABLE     WITH 

1  hour's  earnings 

OCCUPATION 

1899 

1903 

For  1 
passenger 

For  1  ton  of 
freight 

1899 

1903 

1899 

1903 

Blacksmiths 

Boiler  Makers.  .  .  . 

Bricklayers 

Carpenters 

Compositors 

Hod  Carriers 

Iron  Molders 

Laborers,  general. 

Machinists 

Painters. 

Cents 
27.37 
26.54 
45.97 
28.39 
40.86 
25.18 
25.63 
14.57 
24.17 
28.92 
36.84 
35.94 
37.19 

Cents 

29.62 
28.48 
54.71 
35.94 
44.67 
28.63 
30.36 
16.76 
27.09 
34.50 
43.71 
42.25 
44.86 

13.3 
13.4 
23.2 
14.4 
20.7 
12.7 
13.0 
7.4 
12.2 
14.6 
18.6 
18.2 
18.8 

14.8 
14.2 
27.3 
17.9 
22.3 
14.3 
15.1 
8.4 
13.5 
17.2 
21.8 
21.1 
22.4 

36.4 
36.7 
63.5 
39.2 
56.4 
34.8 
35.5 
20.1 
33.4 
39.9 
50.9 
49.6 
51.4 

38.8 
37.3 
71.7 
47.1 
58.5 
37.5 
39.8 
22.0 
35.5 
45.2 

Plumbers 

57.3 

Stonecutters 

Stone  Masons 

55.4 
68.8 

It  appears  from  the  foregoing  that  the  average  black- 
smith earned  27.37  cents  per  hour  in  1899  and  29.62 
cents  per  hour  in  1903.  At  the  passenger  rates  of  1899 
his  hour's  earnings  in  that  year  would  buy  13.3  miles 
of  railway  transportation.  In  1903,  although  passen- 
ger rates  had  slightly  advanced,  his  earnings  had 
advanced  so  much  more  rapidly  that  for  an  hour's 
labor  he  could  obtain  14.8  miles  of  travel.  At  the 
freight  rates  of  1899  and  the  rates  of  wages  then  pre- 
vailing the  average  hour's  earnings  of  the  same 
blacksmith  would  have  been  sufficient  to  pay  for  carry- 
ing a  ton  of  freight  36.4  miles,  but  at  the  wages  and 
rates  of  1903  his  hour's  labor  would  have  paid  for  mov- 

67 


ing  a  ton  38.8  miles.  Similar  results  are  seen  through- 
out the  table;  the  increase  in  the  purchasing  power  of 
some  kinds  of  labor  being  much  greater  than  of  the 
examples  noted. 

RATES  NOT  EXCESSIVE.  The  Chairman  of  the 
Interstate  Commerce  Commission,  Hon.  Martin  A. 
Knapp,  does  not  believe  that  there  is  any  ground  for 
the  charge  that  railway  rates  are  excessive.  In  his 
statement  before  the  Senate  Committee  on  Interstate 
Commerce  on  March  18,  1898,  he  said: 

**In  the  first  place,  as  Senator  Elkins  says,  the 
question  of  excessive  rates — that  is  to  say,  railroad 
charges  which  in  and  of  themselves  are  extortion- 
ate— is  pretty  nearly  an  obsolete  question.  I 
would  not  affirm  that  there  are  not  such  rates; 
yet,  broadly  speaking,  there  are  not  many  such. 
Those  are  not  the  rates  of  which  the  public  com- 
plain.    That  is  not  the  burden  of  the  complaint." 

THE  RETURN  ON  RAILWAY  INVESTMENTS. 

The  report  of  the  Statistician  to  the  Interstate  Com- 
merce Commission  contains  a  ''combined  income 
account  of  the  railways  of  the  United  States,  consid- 
ered as  a  system,"  on  page  74  of  the  Report  for  1903, 
from  which  it  appears  that  the  actual  net  payments  on 
account  of  capital  were  as  follows: 

PAYMENTS  ON  ACCOUNT  OF  CAPITAL. 

Net  interest  on  funded  debt $268,830,564 

Interest  on  current  liabilities 9,060,645 

Net  dividends 166,176,586 

Total $444,067,795 

It  appears,  therefore,  that  $11,146,151,265  of  rail- 
way capital  earned  for  its  owners  $444,067,795,  or  3.98 
per  cent  per  annum  in  the  exceedingly  prosperous  year 
1903.  Surely  this  is  not  to  be  regarded  as  a  high  return, 
especially  in  view  of  the  fact  that  much  of  the  capital 
included  had  previ®usly  been  for  many  years  utterly 
unremunerative. 

68 


WAGES.  Far  the  larger  portion  of  railway  expendi- 
tures consist  of  the  wages  and  salaries  of  employees. 
It  is  true  that  the  rates  of  wages  paid  have  largely 
increased  during  the  last  few  years,  but  no  one  has 
been  heard  to  contend  that  any  class  of  railway  labor  is 
overpaid.  The  following  table  shows  aggregate  wages 
and  salaries  for  each  year  since  1895,  their  relation  to 
operating  expenses,  and,  to  answer  a  familiar  criticism, 
the  amounts  and  the  proportion  of  the  total  paid  as 
salaries  of  general  officers: 

WAGES  AND  SALARIES 


WAGES  AND 

SALARIES  OP 

OPERATING 

SALARIES 

GENERAL  OFFICERS 

YEAR 

Per 

Per 

EXPENSES 

cent  of 

cent  of 

Amount 

oper- 
ating 
ex- 
penses 

Amount 

Total 
Wages 

and 
Salar's 

1903..  . 

$1,257,538,852 

$775,321,415 

61.65 

$14,244,121 

1.84 

1902..  . 

1,116,248,747 

676,028,592 

60.56 

13.090,284 

1.94 

1901... 

1,030,397.270 

610,713.701 

59.27 

13,141,428 

2.15 

1900.  .  . 

961,428.511 

577.264,841 

60.04 

13,157,420 

2.28 

1899.  .  . 

856,968,999 

522,967,896 

61.03 

12,964.442 

2.48 

1898.  .  . 

817.973,276 

495,055.618 

60.52 

12,632,224 

2.55 

1897.  .  . 

752,524,764 

465,601.581 

61.87 

12,304,161 

2.64 

1896.  .  . 

772,989.044 

468.824,531 

60.65 

12,497,957 

2.67 

1895.  .  . 

725,720,415 

445.508,261 

61.39 

12,234,686 

2.75 

RAILWAY  INCOME  AND  WHAT  BECOMES  OF 

IT.  During  the  twelve  months  which  ended  with  June 
30,  1903,  the  railways  of  the  United  States  received  for 
moving  persons  and  property  $1,900,846,907,  and  had 
in  addition  a  net  income  from  investments  of  $49,896,- 
729,  making  a  total  of  gross  receipts  equal  to  $1,950,- 
743,636.  This  seems  like  a  tremendous  sum,  as  it 
undoubtedly  is,  but  very  little  of  it  went  to  the  owners 
of  the  shares  of  railway  corporations.  In  fact,  the 
amount  distributed  to  shareholders  was  actually  but 

69 


$166,176,586,  or  $8.52  in  every  $100.00  of  the  gross 
income.  The  distribution  of  the  gross  receipts  of  1903 
is  shown  below: 


AMOUNTS 

PER 

CENT 

OF 

TOTAL 

To  employees  and  dealers: 

Wages  and  salaries 

Fuel  for  locomotives 

Other  operating  expenses 

$775,321,415 
146,509,031 
335.708.406 

$1,257,538,852 
277,891,209 

144.479,093 

104,657,896 

166,176,586 
«1.950.743,636 

39.74 

7.51 

17.21 

To  creditors: 
Interest  on  funded  debt.  . 
Interest  on  floating  debt.  . 

$268,830,564 
9,060,645 

64.46 

13.78 

.47 

To  the  general  public: 
Taxes 

$57,849,569 
41,948,183 
44,681,341 

14.25 
2  97 

Permanent  improvements 
Miscellaneous 

2.15 
2.29 

To  preserve  the  properties: 

Salaries,    etc.,    on    leased 

lines , 

$430,427 

5,000,000 

99,227.469 

7.41 
.02 

Advances  to  weaker  lines . 
Surplus  accumulated 

.25 
5.09 

To  the  owners: 
Dividends  on  stock 

$166,176,586 

5.36 
8.52 

Total 

100  00 

RAILWAY  EMPLOYEES  AND  RAILWAY  PROS- 
PERITY. The  consequences  of  railway  prosperity 
and  depression  can  always  be  traced  in  the  number  of 
railway  employees  and  the  wages  paid  to  them.  The 
depression  in  the  railway  business  which  continued 
through  the  fiscal  years  from  1894  to  1898,  inclusive, 
kept  the  number  of  employees  at  the  lowest  possible 
limit,  while  the  renewed  activity  that  began  in  1899  is 
expressed  by  a  growing  augmentation  of  the  ranks  of 
railway  labor.    The  following  table  shows  the  number 

70 


of  railway  employees  and  the  number  per  100  miles  of 
line  on  June  30,  1893,  and  every  later  year  for  which 
the  data  are  available: 

NUMBER    OF    RAILWAY    EMPLOYEES. 


Year 

Total 

Per  100  miles 
of  line 

1893 

873,602 

515 

1894 

779,608 

444 

1895 

785,034 

441 

1896 

826,620 

454 

1897 

823,476 

449 

1898 

874,558 

474 

1899 

928,924 

495 

1900 

1,017,653 

529 

1901 

1,071,169 

548 

1902 

1,189,315 

594 

1903 

1,312,537 

639 

The  amounts  paid  in  wages  and  salaries  to  railway 
employees  are  not  available  for  years  prior  to  1895. 
The  increase  between  1895  and  1903  was  from  $445, 508,- 
261  to  $757,321,415,  or  nearly  70  per  cent. 


RAILWAY  CAPITALIZATION.  The  total  railway 
capitalization  on  June  30,  1903,  the  latest  date  for 
which  the  statistics  are  available,  as  reported  by  the 
Statistician  to  the  Interstate  Commerce  Commission, 
was  $12,599,990,258,  but  this  aggregate  includes 
$2,318,391,953  in  par  value  of  railway  securities  held 
in  the  treasuries  of  railway  companies  and  thus  the 
basis  of  other  issues  of  securities.  Part  of  this  du- 
plication was  offset,  however,  by  the  exclusion  from 
the  capital  account  of  $864,552,960  of  current  liabilities. 
Allowing  for  these  items,  the  capital  account  stands 
as  follows: 

71 


RAILWAY    CAPITALIZATION. 

Stock  not  owned  by  railways $4,357,235,824 

Bonds  not  owned  by  railways 4,906,661,409 

Miscellaneous  obligations 640,704,135 

Income  bonds 234,016,821 

Equipment  trust  obligations 142,980,116 

Current  liabilities 864,552,960 

Total $11,146,151,265 

Note — Since  this  table  was  placed  in  type  the  Bureau  of  the 
Census  of  the  United  States  Department  of  Commerce  and  Labor 
has  issued  a  report  prepared  by  Prof  H.  C.  Adams,  Statistician 
to  the  Interstate  Commerce  Commission,  which  shows  that  the 
commercial  value  of  the  railway  property  in  the  United  States 
is  $11,244,852,000. 

There  is  a  great  deal  of  loose  talk  concerning  over- 
capitalization, much  of  which  is  merely  the  repeti- 
tion of  estimates  which,  in  the  rapid  progress  of  the  last 
decade  or  two,  have  lost  their  last  shred  of  intelligent 
basis.  The  general  policy  of  paying  for  the  improve- 
ments necessary  to  keep  their  properties  up  to  the 
state  of  efficiency  essential  to  meet  modern  conditions 
out  of  earnings  and  making  no  capital  charge  therefor 
has  really  destroyed  the  last  vestige  of  "water''  in  the 
capitalization  of  the  American  railway  system  as  a 
whole. 

RELATION  OF  CAPITALIZATION  TO  MILE- 
AGE. In  1880  there  were  87,800  miles  of  railway 
in  the  United  States  and  20,300  miles  of  third  track, 
fourth  track,  yard  track  and  sidings.  The  average 
capitalization  per  mile  at  that  time,  that  is,  per  mile 
of  main-line  first  track,  was: 

Capital  stock *$27,700 

Bonds  (all  funded  debt) 25,400 

In  1903  there  were  207,000  miles  of  main-line  first 
track,  17,000  miles  of  second,  third  and  fourth  track, 
and  61,000  miles  of  yard  and  side  tracks.  The  average 
capitalization  per  mile,  that  is,  per  mile  of  main-line 
first  track,  was: 

72 


Capital  stock .  .  . *$21,050 

Bonds  (all  funded  debt) 23,700 

While  in  these  years  the  total  first  track  main-line 
mileage  increased  124  per  cent,  the  mileage  of  total 
track  increased  164  per  cent,  and  the  mileage  of  second, 
third,  fourth,  yard  and  side  tracks  increased  284  per 
cent.  This  vastly  increased  efficiency  per  mile  of  rail- 
road together  with  better  ballast,  heavier  rails,  addi- 
tional signaling  and  other  safety  appliances,  the 
enormous  improvement  in  the  size  and  capacity  of 
locomotives  and  cars,  and  vast  increase  in  their  num- 
ber, more  commodious  stations  and  terminals  was 
accompanied  by  a  decrease  in  average  capitalization 
per  mile  of  line. 

It  is  evident  from  this  exhibit  that  whatever  water 
may  at  some  time  in  the  past  have  been  in  any  of  the 
securities  of  any  American  railroad  company,  the 
capitalization  of  the  American  railroad  system  as  a 
whole  to-day  contains  no  water.  It  has  been  so 
effectually  squeezed  out  that  so  eminent  and  impartial 
an  authority  as  President  Hadley,  of  Yale,  but  recently 
made  the  statement  that  the  railways  of  the  United 
States  could  not  be  duplicated  for  their  present  capital- 
ization. Out  of  the  revenue  of  the  American  railroads 
there  comes  no  undue  sum  for  payment  of  interest 
on   securities. 

*  These  figures  do"  not  include  shares  and  securities  of  one 
railroad  that  are  held  by  another.  Such  inclusion,  as  usually 
made,  exaggerates  the  real  capitalization. 

''DIVIDENDS  AND  INTEREST  DO  NOT 
INCREASE  RAILWAY  CHARGES.  ''It  is  now 
pretty  well  understood  that  fixed  charges  do 
not  directly  affect  rates;  nor  do  dividends  affect 
them,  except  in  so  far  as  a  road  which  is  paying 
very  high  dividends  may  reduce  rates  lower  than  it 
otherwise  would,  in  order  not  to  tempt  new  capital 
into  the  field." — President  A.  T.  Hadley,  Railroad 
Transportation,  p.  265. 

73 


RAILWAY    STOCK  WHICH   EARNS   NOTHING. 

Even  in  1903  no  less  than  43.94  per  cent  of  the  out- 
standing railway  stock  paid  no  dividends  and  those 
who  held  a  goodly  portion  of  the  dividend-paying  stock 
of  that  year  had  to  average  their  receipts  over  many 
previous  years  in  which  they  had  received  nothing. 
Even  as  late  as  1897  the  proportion  of  non-paying 
stock  was  70.10  per  cent  of  the  total.  The  following 
statement  shows  these  facts  for  each  yesn  covered  by 
the  reports  of  the  Interstate  Commerce  Commission: 


BTOCK    NOT 

PAYING 

DIVIDENDS 

Average 

Amount 
paid  in  divi- 

rate 

paid  on 
dividend- 

YEAR 

Proportion 

dends  a 

paying 

Amount 

of  all  stock 

stock 

Per  cent. 

Per  cent 

1903....... 

$2,704,821,163 

43.94 

$196,728,176 

6.70 

1902 

2,686,556.614 

44.60 

185.391,655 

5.55 

1901 

2,828,991.025 

48.73 

156,735,784 

5.26 

1900 

3,176,609,698 

54.34 

139,597,972 

6.23 

1899 

3.275,509,181 

59.39 

111,009,822 

4.96 

1898 

3,570,155.239 

66.26 

96.152,889 

5.29 

1897 

3.761,092,277 

70.10 

87,110,599 

5.43 

1896 

3,667.503,194 

70.17 

87,603.371 

5.62 

1895 

3,475,640,203 

70.06 

85.287.543 

5.74 

1894 

3,066,150,094 

63.43 

95.515.226 

5.40 

1893 

2.859,334,572 

61.24 

100.929.885 

5.58 

1892 

2,807,403,326 

60.60 

97,614,745 

6.35 

1891 

2,654,258,391 

59.64 

91,117,913 

5.07 

1890 

2,811,526,552 

63.76 

87,071,613 

5.46 

1889 

2,621,439,792 

61.67 

82,110.198 

6.04 

1888 

2,374,200,906 

61.44 

80.238,065 

5.38 

a  Large  portions  of  the  aggregates  shown  in  this  column  were 
paid  to  railway  corporations;  the  actual  totals  paid  to  private 
investors  were  much  lower  than  those  shown. 

Even  in  1903  the  dividend  rate  on  all  of  the  stock 
outstanding  was  but  3.20  per  cent,  and  that  on  stock  in 
private  hands  but  3.81  per  cent. 


74 


RAILWAY    BONDS    WHICH    EARN    NOTHING. 

Statistics  reported  by  the  Interstate  Commerce  Com- 
mission show  that  a  part  of  the  funded  debt  of  the  rail- 
ways of  the  country  has  always  been  forced  to  go 
without  its  interest.  Happily  this  is  now  a  small 
portion  of  the  total.  The  following  figures  are  official. 
The  last  column  in  the  table  is  based  upon  a  com- 
parison of  the  total  interest  accrued  with  the  total 
funded  debt  outstanding. 

FUNDED    DEBT    AND  INTEREST. 


FUNDED  DEBT 
NOT   PAYING  INTEREST 

a 

Interest 
accrued  dur- 
ing year 

Average  rate 

of  interest  on 

all  funded 

YEAR 

Amount 

Propor- 
tion of 

all 
bonds 

debt  out- 
standing 
b 

1903 

1902 

1901 

1900 

1899 

1898 

1897 

1896 

1895 

1894 

1893 

1892 

$272,788,421 
294.175.243 
361.905.203 
378,937.806 
572.410.746 
852.402.622 
867,950,840 
860.559,442 
890.561.460 
914,757.607 
743,015.132 
777,719,420 

Per  cent 

4.33 

4.89 

6.23 

6.78 

10.45 

15.82 

16.59 

16.26 

16.71 

17.29 

14.39 

15.56 

$283,953,124 
274,421,855 
262.094,838 
252.949,616 
251.158.087 
246,126.691 
247.880.230 
249.624,177 
252,512,920 
252.779,523 
250,176,887 
240,074,895 

Per  cent 
4.41 
4.49 
4.46 
4.48 
4.55 
4.53 
4.70 
4.67 
4.69 
4.72 
4.79 
4.75 

a  Exclusive  of  equipment  trust  obligations. 

6  Including  interest  on  equipment  trust  obligations. 


NECESSITY  FOR  THE  INVESTMENT  OF  MORE 
CAPITAL.  Although  in  the  last  twenty  years  there  has 
been  a  marked  increase  in  the  intensive  development 
of  the  American  railroads,  in  the  provision  of  air- 
brakes, improved  signals  and  other  safety  appliances; 
in  the  erection  of  larger  and  better  arranged  stations, 

75 


yards  and  terminals,  it  is  evident  that  the  increasing 
density  of  population  in  the  older  portions  of  the 
country  makes  still  further  investment  in  this  direction 
imperative  and  that  the  growing  needs  of  the  less 
thickly  settled  regions  for  increased  and  improved 
transportation  facilities  necessitate  the  application  of 
additional  capital.  It  is  especially  in  the  remote  and 
undeveloped  regions  of  the  United  States  that  the  rail- 
roads in  the  past  have  been  obliged  to  foster  industry 
by  fixing  rates  at  the  lowest  possible  level  so  as  to 
enable  the  marketing  of  products.  If  the  fixing  of  rates 
is  to  be  made  a  governmental  function,  such  regions 
will  necessarily  suffer  most  and  into  them  there  will  no 
longer  be  the  free  flow  of  capital  for  development 
which  is  encouraged  by  freedom  in  rate-making.  At 
the  beginning  of  the  era  of  railroad  transportation  the 
principal  countries  of  Europe  were  already  supporting 
a  dense  population,  largely  the  inhabitants  of  towns 
and  cities  that  were  but  short  distances  apart.  Their 
railroads  therefore  almost  from  the  beginning  were  of 
complete  and  substantial  construction.  The  rights  of 
way  were  bridged  at  grade  crossings  or  sunken  and 
walled  in.  The  stations  were  commodious,  and  often 
of  stone.  The  scale  of  expenditure  necessary  to  accom- 
plish these  results  is  evidenced  by  the  capitalization  of 
the  railroads  of  the  principal  European  countries 
which  at  this  time  is  approximately  as  follows  per  mile: 

England $280,000 

France 126,000 

Germany 103,000 

The  current  capitalization  of  the  American  railroads  is 
approximately  $53,000.00  per  mile.  When  the  era 
of  railroad  transportation  began  there  was  in  the  United 
States  but  a  small  population  and  it  was  scattered  over 
vast  areas.  If  the  railroads  were  to  be  built  at  all  it  was 
necessary  that  they  be  built  cheaply. 

76 


RAILWAY  PROSPERITY  AND  QUALITY  OF 
SERVICE.  During  the  lean  years  which  followed  the 
panic  of  1893  the  railways  were  compelled,  in  conse- 
quence of  depleted  revenues,  to  curtail  their  expendi- 
tures for  labor  and  to  reduce  the  number  of  their 
employees.  In  spite  of  the  considerable  decrease  in 
traffic  movement  which  permitted  some  reduction  in 
the  number  of  trainmen  and  others  directly  engaged 
in  the  movement  of  trains  and  traffic  it  was  inevitable 
that  the  greatest  reduction  should  be  in  the  numbers 
assigned  to  the  maintenance  of  roadbed,  structures  and 
equipment.  Between  June  30, 1893,  and  the  same  date 
in  1894,  the  railways  were  compelled  by  adverse  circum- 
stances to  reduce  the  number  of  their  employees  from 
873,602  to  779,608,  a  net  reduction  of  93,994,  or  10.76 
per  cent.  The  distribution  of  this  reduction  among 
the  different  classes  of  employees  was  as  follows:  40,481 
men  were  taken  from  the  number  assigned  to  the 
maintenance  of  track,  roadbed,  and  structures,  a 
reduction  of  15.94  per  cent  in  a  branch  of  the  service 
which  had  required  the  labor  of  29.33  per  cent  of  all 
railway  employees;  23,490  men  were  taken  from  the 
maintenance  of  equipment,  a  reduction  of  13.39  per 
cent  in  service  which  had  employed  20.09  per  cent  of 
the  men  in  the  service,  and  the  balance  from  the  services 
of  conducting  transportation  and  general  administra- 
tion. In  other  words,  the  work  of  keeping  roadbed, 
track  and  structures  up  to  the  normal  standard, 
although  it  had  required  less  than  one-third  of  the 
aggregate  number  of  workmen,  suffered  43.45  per  cent 
of  the  reduction,  while  maintenance  of  equipment, 
which  had  given  employment  to  one-fifth  of  the  total, 
suffered  one-quarter  of  the  reduction.  Together  these 
manitenance  services  had  occupied  the  labor  of  49.42 

77 


per  cent  of  the  employees,  but  from  their  ranks  was 
taken  67.37  per  cent  of  the  reduction.  The  number  of 
men  employed  in  these  various  branches  of  service  per 
hundred  miles  of  line  in  1893,  1894,  1895  and  every 
alternate  year  thereafter  appears  below: 

EMPLOYEES    PER    100   MILES    OF    RAILWAY   LINE. 


ENGAGED  IN 

Mainte- 

YEAR 

nance 

Mainte- 

Con- 

of way 

nance  of 

ducting 

adminis- 

Unclass- 

Total 

and 

equip- 

transpor- 

tration 

ified 

struct- 

ment 

tation 

ures 

1893  .  . 

151 

103 

234 

21 

5 

515 

1894.. 

123 

86 

208 

18 

8 

444 

1895.. 

128 

88 

204 

18 

4 

441 

1897.. 

134 

88 

206 

17 

4 

449 

1899.. 

153 

96 

223 

18 

5 

495 

1901.. 

176 

105 

245 

20 

2 

548 

1903.. 

211 

124 

281 

22 

1 

639 

The  panic  of  1893  also  caused  a  temporary  curtail- 
ment of  the  relative  amounts  of  money  expended  for 
keeping  up  the  quality  of  way,  structures  and  equip- 
ment. In  1893  the  expenditures  for  these  purposes 
amounted  to  36.98  per  cent  of  all  operating  expenses, 
but  in  the  following  year  they  were  reduced  to  35.07 
per  cent.  The  total  reduction  in  the  expenditures  for 
operation  between  1893  and  1894  amounted  to  $96,- 
506,977,  and  of  this  reduction  the  maintenance  services 
indicated  contributed  51.36  per  cent.  The  expendi- 
tures for  maintenance  of  way,  structures  and  equip- 
ment and  their  proportion  to  the  total  cost  of  operation 
in  1893,  1894,  1895  and  every  alternate  year  thereafter 
appear  as  follows: 

78 


MAINTENANCE    EXPENDITURES. 


YEAR 

AMOUNT 

PER    CENT 

OF    ALL 
OPERATING 

EXPENSES 

1893 

$306,134,285 
256,563.912 
257,765.053 
282,196,761 
331,330,055 
421,356,162 
506,851,516 

36.98 

1894 

1895 

1897 

1899 

1901 

35.07 
35.52 
37.49 
38.67 
40.88 

1903.... 

40.31 

RAILWAY  OWNERSHIP  DIFFUSED.  Small  as 
are  the  percentages  of  return  upon  railway  investments 
in  general  there  are  those  who,  hastily  assuming  that 
this  class  of  property  belongs  to  a  limited  number  of 
very  wealthy  persons,  would  willingly  see  the  average 
return  to  investors  still  further  reduced.  It  is  no 
doubt  a  fact  that  the  progressive  concentration  of  rail- 
way control  under  a  few  great  corporations  and  closelj^ 
allied  financial  interests  has  been  confused,  in  the 
popular  mind,  with  an  actual  concentration  of  owner- 
ship. In  other  words,  multitudes  of  otherwise  intelli- 
gent people  are  so  misled  by  their  conception  of  the 
artificial,  State-created  entities  known  as  '' corpora- 
tions,'^  that  they  fail  to  perceive  that  they  are  but  the 
agencies  of  the  millions  of  natural  persons  who  are  the 
real  owners  of  all  corporate  property.  Even  a  hasty 
and  incomplete  investigation  of  the  ownership  of  rail- 
road property  shows  by  statistics  of  unquestionable 
accuracy  that  the  actual  beneficial  interest  in  the  rail- 
ways of  the  country  is  widely  diffused.  A  single  rail- 
road, the  Illinois  Central,  has  9,123  shareholders,  of 
whom  7,174  own  less  than  100  shares  each,  their 
average  holding  being  less  than  23  shares.  A  recently 
published  table  relating  to  this  company  merits  repro- 
duction.   It  is  as  follows: 

79 


ILLINOIS    CENTRAL    RAILROAD    COMPANY DISTRIBUTION 

OF      SHARES      AS     REGISTERED      ON     THE      COM- 
PANY'S BOOKS  AT  THE  CLOSE  OF  BUSI- 
NESS,   SEPTEMBER    29,   1903. 


Holdings 

Number 
of 
stock- 
holders 

Shares  of 
SlOO 
each 
held 

Per  cent 

of 

entire 

capital 

Average 
holdings 

in 
dollars 

1  to  90  shares . 

7,174 

391 

1,281 

38 

164,989 
39.100 

270,581 
19,000 

17.36 
4.11 

28.47 
2.00 

$2  299  82 

100  shares  even 

101  to  499  shares 

500  shares  even 

10,000.00 
21,123.64 
50,000.00 

Total  of  small  holdings  . 
501  shares  and  upwards. 

8,884 
239 

493,670 
456,714 

51.94 
48.06 

5,556.84 
191,093.72 

Total  of  all  holdings. . . 

9.123 

950.384 

100.00 

$10,417.45 

The  average  annual  income  of  the  8,884  small  holders 
from  a  6  per  cent  dividend  is  but  $333.41,  while  the 
largest  holders  among  them  would  receive  but  $3,000 
each  yearly  from  their  investments.  The  latest  data 
on  the  subject  of  stockholdings  are  contained  in  the 
report  of  the  Interstate  Commerce  Commission  sub- 
mitted on  February  24,  1905,  in  response  to  a  resolu- 
tion of  the  Senate.  This  report  (Senate  Doc.  No.  138, 
58th  Cong.,  3d  ses.)  shows  that  there  are  no  less  than 
327,851  shareholders  of  record  of  American  railway 
corporations.  As  this  includes  many  fiduciary  holders 
who  represent  large  bodies  of  individuals  and  some 
holding  companies  whose  own  shares  are  widely  dis- 
tributed, the  real  aggregate  is  doubtless  much  greater. 


*'It  has  been  said  without  contradiction  that  a 
reduction  in  the  earnings  of  the  railroads  amounting 
to  1  mill  per  ton  per  mile  would  extinguish  all  possi- 
bilities of  dividends,  and  a  reduction  of  one  more  mill 
would  extinguish  all  possibility  of  interest." — David 
Willcox,  before  Senate  Committee  on  Interstate  Commerce. 

80 


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83 


LIFE  INSURANCE  COMPANIES  AS  RAILWAY 
OWNERS.  The  life  insurance  companies  of  the 
country  constitute  the  largest  class  of  investors  in 
railroad  property.  Through  them  vast  numbers  of 
American  citizens  protect  their  families  against  the 
financial  difficulties  that  too  often  add  want  and 
privation  to  the  natural  sufferings  that  inevitably 
attend  death.  Through  them  the  dependent  members 
of  millions  of  families  are  the  actual  beneficial  owners 
of  hundreds  of  millions  of  railroad  property.  There  is 
one  form  of  life  insurance  which  appeals  exclusively  to 
wage-earners,  and  other  persons  whose  incomes  are 
very  moderate.  It  is  known  as  ''industrial"  insurance, 
because  it  is  mainly  in  the  ranks  of  the  manual  workers 
that  it  finds  its  patrons.  Six  companies  now  write 
policies  of  this  class,  and  their  policy  holders  number 
no  less  than  13,789,186,  while  the  aggregate  of  their 
policies  is  $1,894,811,287.  These  companies  own 
bonds  of  steam  railroads  to  the  amount  of  $50,236,742 
and  shares  to  the  value  of  $2,011,294.  They  hold  as 
collateral  for  loans  railroad  bonds  worth  $1,124,645 
and  shares  worth  $605,600.  The  following  table 
includes  all  classes  of  life  insurance: 

LIFE    INSURANCE    COMPANIES. 

(Those  authorized  to  do  business  in  Massachusetts.) 

Number  of  policy  holders: 

Ordinary 4,358,196 

Industrial 13,789,186 

Total 18,147,382 

Amount  of  policies  in  force: 

Ordinary $9,121,600,341 

Industrial 1,894,811,287 

Total $11,016,411,628 

84 


Railroad  securities  owned: 

Shares,  number 432,126 


Shares,  book  value $48,661 .655 

Bonds,  book  value 619,601,241 


Total,  book  value $668,262,896 


Railroad  securities  held  as  collateral: 

Shares,  number    259,670 

Shares,  market  value $21,878,199 

Bonds,  market  value 24,503,084 


Total,  market  value $46,381,283 

The  assets  of  the  companies  represented  in  the  fore- 
going statement  aggregate  $2,128,131,253,  so  that  the 
railroad  securities  owned,  excluding  those  held  as  col- 
lateral, amount  to  31.40  per  cent  of  the  total  security 
for  the  payment  of  their  policies. 

FIRE  INSURANCE  COMPANIES  AS  RAILWAY 
OWNERS.  The  total  wealth  of  the  American  people 
is  estimated  by  the  Bureau  of  Statistics  in  the  Depart- 
ment of  Commerce  and  Labor  at  $94,300,000,000. 
Much  of  this  aggregate  consists  of  real  estate  and  other 
property  which  from  its  nature  is  not  subject  to  the 
risk  of  destruction  by  fire  or  not  insurable  against  fire 
losses.  Yet  the  fire  insurance  companies  have  now 
in  force  fire  policies  in  the  aggregate  amount  of  $26,083,- 
790,625.  Who  can  doubt  that  the  protection  afforded 
by  these  policies  is  so  widely  diffused  as  to  include 
all  but  an  insignificant  proportion  of  the  owners  of 
insurable  property?  Who  can  doubt  that  this  pro- 
tection extends  to  almost  all  the  farmhouses  and  small 
homes  of  the  country?  The  railroad  securities  owned 
and  held  as  collateral  by  these  fire  insurance  com- 
panies are  shown,  as  follows: 

85  , 


Amount  of  policies  in  force $26,083,790,625 

Railroad  securities  owned: 

Shares,  number 281,458 

Shares,  book  value $30,157,552 

Bonds,  book  value 83,545,341 

Total,  book  value §113,702.893 


Railroad  securities  held  as  collateral: 

Shares,  number 13,897 

Shares,,  market  value $1,074,881 

Bonds,  market  value 674,871 

Total,  market  value $1,749,752 

Note. — The  data  in  this  table  and  jearagraph  are  from  the 
reports  of  those  fire  insurance  companies  which  are  authorized  to 
do  business  in  the  State  of  Massachusetts.  These  doubtless 
include  all  the  larger  companies  but  not  all  of  the  smaller  com- 
panies of  local  operation. 

When  it  is  realized  that  the  aggregate  assets  of  the 
companies  included  in  the  foregoing  statement  amount 
to  $393,148,697,  it  must  be  evident  that  the  security 
which  they  afford  would  be  seriously  impaired  by  any 
successful  attack  upon  railroad  values.  Leaving  out 
of  the  account  bonds  and  shares  of  the  market  value 
of  $1,749,752,  which  they  hold  as  security  for  loans, 
the  railroad  bonds  and  shares,  of  which  these  fire  in- 
surance companies  are  the  actual  owners  amount 
to  28.92  per  cent  of  their  entire  assets.  It  follows 
that  of  the  $26,083,790,625  which  represent  the  fire 
risks  covered  by  policies  in  these  companies  no  less 
than  $7,543,432,249  depend  upon  the  stability  of  rail- 
road   values. 


ACCIDENT  AND  GUARANTY  COMPANIES  AS 
RAILWAY  OWNERS.  Accident  insurance  and  guar- 
antee and  bonding  companies  are  large  owners  of  rail- 

86 


way  securities.     The  following  data  relate  to  companies 
of  this  class: 

{Those  authorized  to  do  business  in  Massachusetts.) 

Railroad  securities  owned: 

Shares,  number 54,408 

Shares,  book  value $4,840,662 

Bonds,  book  value 10,915,587 

Total,  book  value $15,756,249 


Railroad  securities  held  as  collateral: 

Shares,  number 1,740 

Shares,  market  value $30,815 

Bonds,  market  value 5,150 

Total,  market  value $35,965 

EDUCATIONAL  INSTITUTIONS  AS  RAILWAY 
OWNERS.  The  educational  institutions  of  the  United 
States  have  received  many  donations  of  large  and 
small  amounts  which  make  up  a  vast  aggregate.  This 
wealth  they  hold  as  trustees  for  the  present  and  future 
generations  of  the. young  men  and  women  of  America. 
Upon  these  foundations  must  be  created  a  structure 
whose  strength  and  symmetry  will  measure  the  future 
intelligence,  progress  and  prosperity  of  the  American 
people.  The  stability  of  this  foundation  is  largely 
bound  up  with  the  stability  of  railroad  investments 
It  has  been  ascertained  that  seventy-four  institutions 
of  learning,  nearly  all  of  them  colleges  or  universities, 
but  including  a  few  secondary  schools,  hold  greater  or 
less  amounts  of  railroad  securities.  Of  these,  sixty- 
seven  own  bonds,  and  thirty-four  own  stocks;  some, 
of  course,  owning  both.  The  following  data  sum- 
marize the  lesults  of  this  investigation: 

87 


EDUCATIONAL  INSTITUTIONS. 

Number  represented 74 

Total  endowments $142,242,079 

Railroad  bonds  owned 43,381,318 

Railroad  shares  owned 4,087,009 

Total  railroad  securities  owned 47,468,327 

Proportion    of    railroad    securities    to 

total  endowments,  per  cent 33.37 

These  valuations  of  the  railroad  securities  are,  with 
insignificant  exceptions,  those  of  the  respective  treas- 
urers   in    their    balance   sheets. 

RECAPITULATION  OF  RAILWAY  OWNERSHIP 
DATA.  A  recapitulation  of  the  data  in  regard  to 
insurance  companies  follows: 

ALL  CLASSES  OF  INSURANCE  COMPANIES. 


RAILWAY   SECURITIES 

Owned 

Held  as 
collateral 

Total 

Shares,  number 

767,992 

275,307 

1,043.299 

Shares,  value 

Bonds,  value 

S  83,659,869 
714,062,169 

$22,983,895 
25,183,105 

$106,643,764 
739,245,274 

Total 

$797,722,038 

$48,167,000 

$845,889,038 

The  extent  in  which  the  business  life  of  the  nation  is 
based  upon  railroad  values  and  the  diffusion  of  railroad 
ownership  may  be  summarized,  so  far  as  they  are  dis- 
closed by  these  investigations,  by  the  following  table: 

VALUE  OF  RAILROAD  SECURITIES  HELD. 

By   the   insurance  companies $845,889,038 

By    the    savings   institutions 571,031,277 

By  the  educational  institutions 47,468,327 

Total $1,464,388,642 

88 


Who  can  doubt  that  complete  returns  from  these 
three  classes  of  institutions  would  show  that  they  hold 
much  more  than  two  billions  of  railroad  property? 

GENESIS  OF  THE  INTERSTATE  COMMERCE 
LAW.  The  original  Interstate  Commerce  law  was 
adopted  in  1887,  after  fifteen  years  of  more  or  less 
continuous  discussion,  in  and  out  of  Congress.  The 
records  of  Congressional  debates  and  the  public  press 
of  the  period  contain  a  very  complete  record  of  the 
causes  which  inspired  the  public  demand  for  this 
legislation,  and  there  is  no  difficulty  in  ascertaining 
precisely  what  they  were.  The  advocates  of  legislative 
action  objected  (1)  to  railway  pooling,  (2)  to  rebates 
and  secret  discriminations  among  shippers,  (3)  to 
charges  which  they  deemed  to  be  too  high  and  (4)  to 
alleged  injustice  in  the  relations  among  different  rates. 
Of  all  these  objections  that  against  rebates  and  secret 
discriminations  was  unquestionably  the  strongest 
and  there  is  ample  reason  for  believing  that  without 
it  there  would  have  been  no  legislation.  The  law 
adopted  made  the  pooling  of  traffic  or  earnings  unlaw- 
ful and  all  of  the  pooling  contracts  then  in  existence 
were  at  once  abandoned.  There  has  been  no  resump- 
tion of  the  forbidden  practice.  The  new  law  also 
prohibited  rebates  or  secret  discriminations  and  estab- 
lished what  the  Congress  which  passed  it  clearly 
regarded  as  ample  machinery  for  enforcing  the  prohi- 
bition. But  this  portion  of  the  law  was  less  effective 
than  that  against  pooling  and  for  two  reasons.  These 
reasons  were  (1)  certain  defects  in  the  law  which  were 
not  completely  remedied  until  the  adoption  of  the 
Elkins  law  in  1903,  and  (2)  the  unwillingness  of  the 
Interstate  Commerce  Commission,  the  agency  created 
to  enforce  the  law,  to  give  proper  attention  to  this 
portion   of  its   duty.     Although  the   first   obstacle  to 

89 


the  enforcement  of  the  law  against  rebates  was  wholly 
removed  by  the  Elkins  law  the  second  remains.  The 
Commission  still  prefers  outwardly  to  assume  the 
dignity  of  a  judicial  tribunal — although  in  practice 
departing  far  from  the  true  standard  of  judicial  im- 
partiality— to  the  more  humble  but  more  useful  function 
of  vigorously  prosecuting  offenders  against  the  law 
that  it  was  created  to  enforce.  In  the  language  of 
Judge  Grosscup  the  Commission  ''has  put  on  the  robes 
when  it  ought  to  have  worn  the  overalls. ''  The 
unanimous  testimony  of  those  who  know  the  truth 
is  that  rebates  and  personal  discriminations,  in  their 
usual  forms,  became  obsolete  on  the  passage  of  the 
Elkins  law  and  have  remained  so.  If  there  are  still 
occasional  instances  of  the  subtler  forms  of  unjust 
preference  it  is  because  the  Commission  has  refrained 
from  utilizing  the  great  powers  entrusted  to  it.  The 
law  can  be  enforced  as  it  stands  so  as  to  punish  and 
prevent  every  possible  form  of  rebatirlg.  If  there 
were  excessive  rates  prior  to  1887  they  long  ago  dis- 
appeared. The  loudest  advocates  of  radical  legislation 
do  not  contend  that  such  rates  now  exist.  Rates 
are  lower  in  the  United  States  than  anywhere  else  in 
the  world,  and  on  most  kinds  of  traffic  so  low  as  to 
affect  but  slightly,  if  at  all,  the  prices  of  the  articles 
carried.  And  they  are  growing  lower  every  day. 
Unjust  discriminations  between  places  and  kinds  of 
traffic  have  been  illegal  since  1887,.  if  they  were  not 
before,  under  the  Common  Law.  Whenever  the  Inter- 
state Commerce  Commission  has  reason  to  believe  that 
any  discrimination  forbidden  by  law  is  being  practiced 
it  can  appeal  to  any  Circuit  Court  of  the  United  States, 
having  jurisdiction,  to  enjoin  that  discrimination. 
In  such  a  case  the  court  has  full  power  to  forbid  the 
illegal  rates  and  to  enforce  its  prohibition.  But 
although  it  is  more  than  two  years  since  the  Supreme 

90 


Court  upheld  the  validity  of  this  law  the  Commission 
has  not  yet,  in  a  single  subsequent  case,  appealed  to 
any  court  for  such  a  decree.  Either  there  are  no  such 
discriminations  in  existence,  or  those  affected  have 
not  thought  them  worth  bringing  to  the  attention  of 
the  Commission,  or  the  Commission  has  been  grossly 
derelict  in  performing  its  duty.  The  existing  law  is 
complete  and  ample.  There  can  be  no  real  case  of 
injustice  which  can  not  be  promptly  and  fully  cor- 
rected if  the  authorities  promptly  and  fully  perform 
their  duties.  If  the  Commission  will  not  enforce  the 
present  law  how  can  it  be  expected  to  enforce  any 
other  law  ? 

REBATES  NO  LONGER  GENERAL.  In  his  annual 
message  to  Congress  of  a  year  ago  (transmitted  on 
December  7,  1903),  the  President  declared  concerning 
the  statute  for  the  further  regulation  of  railways, 
adopted  in  February,  1903,  known  as  the  Elkins  law: 

"The  Congress  *  *  *  has  secured  equal  treat- 
ment to  all  producers  in  the  transportation  of 
their  goods,  thus  taking  a  long  stride  forward  in 
making  effective  the  work  of  the  Interstate  Com- 
merce Commission." 

The  testimony  of  the  Interstate  Commerce  Com- 
mission, as  given  in  the  annual  report  which  it  submit- 
ted to  Congress  on  December  17,  1904,  is  that: 

''As  to  that  branch  of  regulation  which  deals 
with  the  publication  and  invariable  application  of 
tariff  rates,  the  act  as  amended  by  the  Elkins  law 
of  February  19,  1903,  appears  to  be  operating 
successfully  as  applied  to  carriers  subject  to  its 
provisions.    *    *    *" 

Mr.  E.  P.  Bacon,  who  is  the  chief  legislative  agent  of 
those  w^ho  wish  to  confer  rate-making  authority  upon 
the  Commission,  on  December  9,  1904,  while  addressing 
the  Committee  on  Interstate  and  Foreign  Commerce  of 

91 


the  House  of  Representatives,  was  asked  whether  he 
had  ''heard  of  any  proceedings  against  the  railroads  in 
the  matter  of  rebates."    He  replied  as  follows: 

"I  have  not  heard  of  any  occasion  for  proceed- 
ings. It  (meaning  the  Elkins  law  of  February  19, 
1903)  has  been  so  generally  observed  by  the  rail- 
ways since  its  passage  that  there  has  been  no 
occasion  for  prosecution." 

During  the  same  hearing,  and  also  with  reference  to 
the  Elkins  Act,  Mr.  Bacon  said: 

^'That  *  *  *  lias  been  productive  of  im- 
mense good.  It  has  been  surprising,  in  fact,  to  me 
to  what  an  extent  that  bill  has  been  complied  with 
by  the  transportation  companies,  and  in  fact  our 
committee  has  been  unable  to  trace  any  violation 
of  that  bill  of  any  consequence.  There  have  been 
some  devices  for  defeating  it  by  the  establishment 
of  side  tracks,  which  are  called  railroads,  so  that  on 
a  division  with  the  railroads  they  get  an  undue 
proportion,  and  by  that  means  obtaining  personal 
discrimination,  personal  favors,  and  personal 
advantages.^  But  the  Commission,  after  hearing 
some  cases  in  that  direction,  have  already  taken 
steps  to  prevent  that  evasion  of  the  law." 

By  whatever  device  accomplished,  a  rebate  is  vicious 
in  principle  and  demoralizing  in  practice.  It  is  fortu- 
nate that  it  offends  the  American  spirit  of  fairness, 
that  it  is  so  wholly  obnoxious  to  the  people  that  its 
condemnation  is  as  certain  and  as  general  as  it  deserves. 
Rebates  from  interstate  freight  charges  have  been 
illegal  for  but  eighteen  years,  and  the  laws  against 
them  have  been  strengthened  from  time  to  time  as 
opportunities  for  their  perfection  have  been  indicated 
by  experience.  If  they  are  not  as  effective  as  the  laws 
against  burglary  and  arson,  the  fact  may  be  set  down 
as,  principally,  evidence  of  the  slow  growth  of  higher 
moral  ideas  amidst  the  struggles  of  the  market  place. 
Further  strengthening  of  these  laws  should   be  wel- 

92 


coined  and  will  be  welcomed  whenever  it  is  clear  that 
the  changes  suggested  are  likely  to  produce  the  results 
desired.  No  railway  officers  are  opposed  to  such 
legislation. 

THE  LUST  OF  POWER.  The  efforts  of  the  Inter- 
state Commerce  Commission  to  secure  additional 
authority  have  been  persistent  and  systematic.  There 
is  no  doubt  that  they  have  had  a  powerful  influence 
upon  public  opinion  which  would  have  been  impossible 
had  the  official  source  of  the  agitation  been  apparent. 
The  following  extract  from  the  official  record  of  the 
proceedings  of  the  Commission  shows  that  what  some 
have  supposed  was  a  spontaneous  outburst  of  public 
sentiment  was  really  a  carefully  contrived  exhibition 
of  the  power  of  a  skillfully  conducted  machine  for  the 
manufacture  of  such  an  appearance  of  public  support 
as,  it  was  hoped,  would  force  Congress  to  enact  the 
anti-railway  legislation  desired  by  the  Commission. 
The  records  of  the  Commission  for  December  8,  1900, 
contain  the  following: 

"Co-operation  with  certain  mercantile  organ- 
izations to  secure  the  adoption  of  amendments  to 
the  act  to  regulate  commerce  being  under  con- 
sideration. 

''It  was  unanimously  voted  to  instruct  the 
Secretary  to  co-operate  with  the  representatives 
of  these  organizations  for  the  purpose  of  securing 
the  adoption  of  necessary  amendments,  and  par- 
ticularly the  passage  of  a  bill  which  has  been 
approved  by  such  organizations  at  a  meeting  held 
in  Chicago  on  November  22,  1899,  and  to  that 
end  to  give  the  public  information  as  to  the  present 
state  of  the  law,  and  the  necessity  for  amending 
it  by  distributing  such  reports,  papers  and  docu- 
ments as  are  designed  to  accomplish  that  purpose, 
and  to  devote  himself  assiduously  to  such  duty.'' 

Among  the  acts  of  the  Secretary,  Hon.  Edward  A 
Moseley,   in   pursuance  of  the  foregoing  resolution  was 

93 


the  wide  dissemination  of  an  appeal  to  boards  of  trade, 
commercial  organizations  and  others  to  bring  pressure 
upon  Senators  and  Congressmen  to  force  them  to  vote 
for  the  bill  favored  by  the  Commission. 

This  appeal  was  signed  officially  by  Hon.  Edward 
A,  Moseley,  the  Secretary  of  the  Commission,  who 
formally  stated  in  regard  to  it  that  his  action  was 
taken  ''simply  as  executive  officer  of  the  Commission." 
Thus  a  great  official  body,  maintained  at  the  cost  of 
the  tax  payers  of  the  United  States  and  for  a  definite  pur- 
pose, used  its  power  and  its  resources  to  maintain 
an  energetic  lobby  and  a  persistent  literary  bureau 
for  the  purpose  of  securing  legislation  antagonistic  to 
a  portion  of  the  tax-paying  public. 

ENVIRONMENT'S  SUBTLE  INFLUENCE.  The 
manner  in  which  local  associations  and  friendships  are 
certain  to  affect  the  ablest  and  most  honest  Govern- 
ment officers,  if  they  are  given  the  power  to  make 
railway  rates,  was  well  illustrated  by  the  order  of  the 
Interstate  Commerce  Commission  in  the  Maximum 
Rate  case.  The  Commissioner  who  wrote  the  opinion 
in  this  case  formerly  resided  at  Rome,  Georgia.  The 
rates  were  reduced  by  the  order  to  both  Rome  and 
Atlanta,  but  very  much  greater  reductions  were  made 
to  Rome  than  to  Atlanta.     This  is  shown  as  follows: 

RATES     IN     CENTS     PER     ONE     HUNDRED     POUNDS     FROM 
CINCINNATI,  OHIO,  TO 


Rome,  Georgia 

Atlanta,  Georgia 

Class 

Old 

of 
Freight 

Rates 

Reduc- 

Old 

Rates 

Reduc- 

Rates 

Ordered 

tion 
Per  cent 

Rates 

Ordered 

tion 
Per  cent 

1 

107 

75 

29.91 

107 

86 

19.63 

2 

92 

64 

30.43 

92 

73 

20.65 

3 

81 

54 

33.33 

81 

60 

25.93 

4 

68 

44 

35.29 

68 

46 

33.82 

5 

56 

34 

39.29 

56 

35 

37.50 

6 

46 

24 

47.83 

46 

27 

41  .30 

94 


No  reasons  for  these  differences  were  given  in  the 
decision,  or,  have  ever  been  given  by  the  Commission. 
The  order  was  declared  unlawful  by  the  Supreme 
Court,  but  had  it  been  enforced  there  is  no  doubt  that 
the  merchants  of  Rome  would  have  gained  a  great 
deal  of  business  at  the  direct  expense  of  Atlanta  mer- 
chants and  would  have  had  cause  to  feel  greatly  in- 
debted to  their  former  fellow-townsman. 

SENATE  DOCUMENT  NO.  257.  It  is  probable  that 
no  erroneous  statement  has  ever  been  more  frequently 
repeated,  more  widely  disseminated,  or  more  generally 
accepted  than  the  assertion  made  by  the  Interstate 
Commerce  Commission  in  Document  No.  257,  issued 
April  7,  1904,  that  the  railways  collected  $155,475,502 
more  freight  revenue  in  1903  than  they  would  if  the 
rates  of  1899  had  been  continued  in  force.  Among  the 
various  items  of  misinformation  which  have  acted  upon 
the  public  mind  and  operated  to  create  whatever  general 
anti-railway  sentiment  now  exists,  none  has  been  more 
profoundly  influential  than  this.  It  seizes  the  imag- 
ination by  giving  definite  magnitude  to  a  charge  that 
had  previously  been  general  and  indefinite.  It  is 
rather  startling,  then,  to  learn  that  this  estimate  was 
derived  through  unwarranted  methods  of  calculation 
from  figures  which  do  not  accurately  portray  the  facts, 
and  therefore  is  erroneous  and  deceptive.  This  is 
the  more  startling  when  it  is  realized  that  the  correct 
figures  had  been  published  in  the  Commission's  own  re- 
ports. Thus  it  was  calculated  (Doc.  257,  p.  8)  that  the 
rate  received  per  ton  of  freight  carried  during  the  year 
that  ended  with  June  30,  1899,  was  95.2  cents,  but  if  the 
Commission  had  used  the  correct  figure,  to  be  found  on 
page  96  of  the  report  of  its  Statistician  for  the  year 
1899,  it  would  have  appeared  that  the  rate  was  sub- 
stantially two  cents  higher,  being  actually  97.131  cents. 

95 


Again  it  appears  (Doc.  257,  p.  4)  that  the  average  rate 
per  ton  which  was  used  for  the  year  1903  was  $1.0793, 
although  the  annual  report  of  the  Statistician  to  the 
Commission  for  that  year  shows  (p.  97)  that  the  actual 
average  was  $1.05158.  The  result  of  these  improper, 
erroneous,  and  deceptive  calculations  was  to  give  a 
figure  substantially  two  cents  too  low  for  the  first  year 
and  one  quite  2J^  cents  too  high  for  the  last  year,  a 
total  difference,  superficially  favorable  to  the  Com- 
mission's argument,  of  nearly  five  cents  per  ton.  The 
mere  substitution  of  the  correct  figures,  as  they  appear 
in  the  reports  of  the  Statistician  to  the  Commission, 
for  the  erroneous  figures  that  were  calculated  especially 
for  the  purposes  of  Document  No.  257,  reduces  the 
apparent  increase  of  freight  earnings  of  $155,475,502 
to  $98,047,874.  The  following  table  shows  in  parallel 
columns  the  average  rates  per  ton  used  in  Document 
No.  257  and  the  correct  figures  as  they  are  to  be  found 
in  the  successive  annual  reports  of  the  Commission's 
own  Statistician: 


AVERAGE  RATE  PER  TON. 


YEAR 

FIGURES    IN 
DOCUMENT 

No.  257 

CORRECT 
FIGURES    a 

PAGE    OF 

statisti- 
cian's RE- 
PORTS 

1899 

$0.9520 

.9524 

1.0269 

1.0058 

1.0793 

0.97131 
.97530 
1.05116 
1.03219 
1 .05158 

96 
95 

1900 

1901 

91 

1902 

93 

1903 

97 

a  See  Statistician's  reports  for  same  years. 

No  one  who  examines  the  foregoing  table  will  fail  to 
appreciate  the  fact  that  the  misleading  figures  used  by 
the  Commission  tended,  apparently,  to  aid  its  argu- 
ment.    In  the  following,  the  table  given  by  the  Com- 

96 


mission  on  page  8  of  Document  No.  257  is  reproduced 
and  in  parallel  columns  are  the  correct  figures  which 
would  have  been  used  had  the  table  been  based  upon 
the  correct  and  easily  accessible  averages: 


YEAR   ENDING 

NUMBER  OF 
TONS  OF 
FREIGHT 
CARRIED 

TOTAL  FREIGHT  REVENUE 
AS  CHARGED 

JUNE  30 

As  given  by  the 
Commission 

The  correct 
figures 

1899 

959,763,583 
1,101,680,238 
1,089.226,440 
1,200,315,787 
1,221,475,948 

$    913,737,155 
1,049,256,323 
1,118,543,014 
1,207,228,845 
1,318,320,604 

$  932,227,966 
1,074,468,736 
1,144,951,266 
1,238,953,952 
1,284.479.677 

1900 

1901 

1902 

1903 

AMOUNT  OF  FREIGHT 
REVENUE  AT  AVERAGE 
RATE  PER  TON  OFI  — 

INCREASE 

YEAR 
END- 
ING 
JUNE 

30 

95.2  cents 

being  the 

average  rate 

for  the  year 

ending 

June  30,  1899, 

as  given  by  the 

Commission. 

97.131  cents 

being  the 

average  rate 

for   the  year 

ending 

June  30,  1899, 

the  correct 

figures 

As 
given  by 
the  Com- 
mission 

The 
correct 
figures 

1899... 

$    913,737,155 
1,048,799,587 
1,036,943,571 
1,142,700,629 
1,162,845,102 

$    932.227,966 
1,070,073,032 
1,057,976,533 
1,165.878,727 
1,186,431,803 

1900... 
1901... 
1902... 
1903... 

$        456,736 

81,599,443 

64,528,216 

155,475,502 

$  4,395,704 
86,974,732 
73,075,225 
98,047.874 

RAILWAY    RATES    HAVE    NOT    ADVANCED 

The  charge  that  railway  rates  have  been  raised  rests 
upon  estimates  made  by  the  Interstate  Commerce 
Commission  in  its  Fourteenth  Annual  (1900)  Report, 
upon  the  report  of  the  Industrial  Commission  (Vol. 
XIX,  p.  281)  and  upon  the  special  report  to  the  Senate 
submitted  by  the  Interstate  Commerce  Commission  on 

97 


April  7,  1904  (Senate  Doc.  257,  58th  Cong.,  2d  ses.). 
These  estimates  have  been  widely  disseminated  and 
the  fact  that  they  are  all  erroneous  in  principle  has 
naturally  failed  to  receive  the  public  attention  which  it 
ought  to  have.  In  its  annual  report  for  1900  the  Com- 
mission discussed  the  then  recent  changes  in  the  great 
freight  classifications  and  this  discussion  was  repeated 
with  but  minor  changes  in  the  final  report  of  the 
Industrial  Commission.  The  only  material  difference 
was  that  while  the  Interstate  Commerce  Commission 
only  suggested  that  if  ''rates  can  be  advanced  25  per 
cent,"  the  ingenuous  author  of  the  Industrial  Com- 
mission's report  boldly  plunged  into  direct  statement 
and  asserted  that  there  had  been  an  advance  in  the 
published  rates  of  the  railways  of  "probably  not  less 
than  25  per  cent."  The  Industrial  Commission  ad- 
mitted that  its  claim  was  not  supported  by  the  average 
rates  per  ton  per  mile  earned  by  individual  railways 
and  that  many  of  these  averages  showed  decreases. 
But  it  alleged  that  they  were  generally  vitiated  by 
including  in  the  calculations  large  amounts  of  ''com- 
pany freight,"  which  moves  free.  The  amount  of  this 
class  of  freight  had  been  exceptionally  heavy  and  it  was 
claimed  that  its  inclusion  diminished  the  later  averages 
so  that  they  were  not  comparable,  as  representing  rates 
actually  paid,  with  those  of  earlier  years.  The  only 
trouble  with  this  argument  is  that  it  is  not  based  upon  a 
correct  premise.  "Company  freight"  is  not  included  in 
the  ton-mileage  which  is  divided  into  freight  receipts  in 
order  to  determine  average  rates  per  ton  per  mile.  No 
important  railway  employs  this  deceptive  method  and 
the  instructions  for  filing  the  schedules  filed  annually 
with  the  Interstate  Commerce  Commission  have  the 
effect  of  excluding  ton-mileage  of  this  character  from 
representation  in  the  averages  reported.  The  efforts 
of  the  Interstate  Commerce  Commission  and  of  the 

98 


Industrial  Commission  to  sustain  the  allegation  that 
there  had  been  a  great  advance  in  freight  rates  fol- 
lowed substantially  the  same  plan.  On  January  1, 
1900,  a  new  Official  classification  was  promulgated  by 
the  roads  north  of  the  Ohio  and  Potomac  and  east  of 
the  Mississippi  rivers.  It  modified  824  of  the  ratings 
established  by  the  classification  which  it  succeeded 
and,  of  the  changes  made,  818  were  advances  from  one 
class  to  another.  This  classification  is  applicable  to 
traffic  between  Chicago  and  New  York,  unless,  as  in 
the  case  of  grain,  live  stock  and  dressed  meats,  special 
commodity  rates  are  provided.  It  contains  about 
10,000  items,  hence  not  to  exceed  8^2  per  cent  of  the 
total  were  advanced.  The  Interstate  Commerce  Com- 
mission, however,  utterly  ignored  the  unchanged 
items,  and  applying  the  New  York-to-Chicago  rates  to 
the  items  that  had  been  transferred,  multiplied  each 
percentage  of  increase  by  the  number  of  items  to 
which  it  applied,  and  dividing  the  sum  of  the  prod- 
ucts by  818,  the  total  number  of  advances,  obtained 
35.5,  which  it  declared  to  be  the  *' average  advance." 
Now,  this  is  about  as  bad  a  misuse  of  figures  as  could 
be  devised.  It  not  only  ignores  six  items  which 
were  reduced  and  more  than  9,000  which  were  not' 
changed  at  all,  but  it  also  rests  upon  the  obviously 
incorrect  assumption  that  the  traffic  movements 
of  all  the  items  are  equal  in  volume.  The  latter 
error  would  vitiate  any  calculation.  Its  extent  is 
suggested  to  those  in  any  way  familiar  with  traffic 
movement,  by  the  fact  that  at  least  85  per  cent  of  the 
changes  in  the  Official  classification  related  to  the 
comparatively  insignificant  trafiic  that  moves  in  less 
than  carload  lots.  Passing  over  this  error,  however,  it 
will  be  instructive  to  see  how  the  calculation  would 
stand  if  all  of  the  items  in  the  classification  had  been 
included.    This  is  shown  in  the  table  which  follows: 

99 


NUMBER 

EXTENSION 

Items  advanced  35  per  cent 

Items  reduced  30  per  cent. . ,  . 

818 

3 

3 

9,176 

29.039 
90 

Items  reduced  14.3  per  cent 

Items  not  changed.  . 

42.9 

Total 

10.000 

28.906.1 

Average  change  2.89  per  cent. 
Thus   a   very  simple   and   obviously  necessary   cor- 
rection does  away  with  all   but  2.89   per  cent  of  this 
advance  of  35.5  per  cent  which  has  been  exploited  by 
two  Federal  Commissions. 

MISLEADING  STATISTICS.  In  Document  No. 
257  the  Commission  compared  the  average  earnings 
of  the  year  1903  with  the  lowest  average  earnings 
in  the  history  of  the  American  railway  system.  The 
average  rate  per  ton-mile  for  the  year  1899  was  ab- 
solutely the  lowest  ever  received  in  the  United  States, 
which  means  that  it  was  the  lowest  for  any  country 
and  at  any  time  in  the  history  of  railway  transpor- 
tation throughout  the  world.  If  any  other  year 
had  been  selected  as  the  basis  of  comparison  the 
results  would  have  been  quite  different.  One  year 
is  as  good  as  another  for  purposes  of  this  sort  and,  in 
order  to  show  how  a  different  selection  would  have 
operated,  a  table  based  upon  the  year  1894  has  been 
made.  The  first  three  columns  in  this  table  are  identi- 
cal with  those  which  appear  in  the  table  prepared  by 
the  Commission  (Doc.  257,  p.  8),  but  in  the  heading  of 
the  fourth  column  the  average  gross  receipts  per  ton 
carried  shown  in  the  annual  report  of  the  Statistician 
to  the  Interstate  Commerce  Commission  for  1894 
(p. 71),  is  used,  and  in  the  same  column,  in  the  body  of 
the  table  the  aggregate  gross  receipts  which  would  have 
been  obtained  had  this  average  prevailed  in  each  of 

100 


the  years  indicated  in  the  column  at  the  extreme  left 
are  shown.  The  last  column  at  the  right  shows  how 
much  less  was  received  in  each  of  the  years  than  would 
have  been  received  at  the  average  of  1894.  Aggregat- 
ing these  figures,  it  appears  that  through  reductions 
from  1894  to  1903  American  shippers  by  rail  saved  in  a 
single  year  $536,664,859,  which  may  be  set  against 
the  fictitious  and  exaggerated  total  of  the  apparent 
losses  through  increases  from  1899  to  1903  given  by  the 
Commission,  which  total  is  $302,059,897.  Thus  it 
appears  that  in  comparison  with  the  rates  of  the  year 
1896,  railway  earnings  on  the  freight  business  of  1903 
decreased  $234,604,962  more  than  they  increased  in 
comparison  with  the  rates  in  1899. 


Amount  of 

freight  at  aver- 

age  rate    per 

Year 

Number  of 

Total  freight 

ton  of  $1.0252, 

ending 

tons  of  freight 

revenue  as 

being  the  aver- 

Decrease 

June 

carried 

charged 

age  rate  for  the 

30 

year    ending 
June  30,  1896 

1899... 

959,763,583 

$913,737,155 

$1,058,158,546 

$144,421,391 

1900... 

1,101.680,238 

1,049,256,323 

1,214,624,496 

165,368,173 

1901... 

1,089,226,440 

1,118,543,014 

1,200,393,935 

82,350,921 

1902... 

1,200,315,787 

1,207,228,845 

1,325,372,161 

116,143,316 

1903... 

1,221,475,948 

1,318,320,604 

1,346,701,662 

28,381.058 

THE  COMMISSION'S*  MISFIT  REPLY.  While 
Document  No.  257  was  issued  ostensibly  as  a  response 
to  a  resolution  of  the  Senate  it  did  not  respond  to  any 
resolution  ever  adopted,  but  did  respond  to  one  which 
failed  of  adoption.  Important  facts  called  for  in  the 
resolution  which  was  passed  were  omitted,  while,  as 
shown  elsewhere  herein,  improbable  estimates  were 
resorted  to  in  order  to  include  matters  concerning 
which  no  inquiry  had  been  addressed  to  the  Commis- 
sion. The  resolution  which  was  introduced,  probably 
at  the  request  of  some  member  of  the  Commission,  but 
never  adopted  and  that  which  was  actually  passed 
appear  in  parallel  columns   below,   the   former   being 

101 


correctly  designated  as  the  one  responded  to  by  the 
Commission: 


NOT  ADOPTED. 

This  resolution  >vas 
answered. 

Resolved,  That  the  Inter- 
state Commerce  Commis- 
sion is  hereby  directed  to 
furnish  the  Senate  as  speed- 
ily as  may  be  practicable, 
a  report  showing  the  prin- 
cipal   changes    in   railway 
tariff  rates,  whether  result- 
ing from  the  adoption  of 
new  rates  or  the  amend- 
ment of  freight  classifica- 
tions, and  an  estimate  of 
the  effect  of  such  changes 
upon  the  revenues  of  rail- 
way   corporations    in    the 
United  States  during  each 
of  the  fiscal  years  ending 
June  30,  1900,  1901,  1902, 
and     1903,    as    compared 
with    the    revenues    that 
would  have  been  derived 
by  them  under  the  rates 
and  freight  classifications 
in  force  during  the  fiscal 
year  ending  June  30,  1899. 
And  that  said  Commission 
also  include  in  such  report 
such   estimate    as    may    he 
practicable  of  the  effect  of 
such  changes  in  rates  and 
freight  classifications  upon 
the  revenues  of  said  railway 
corporations    derived    from 
the  transportation  of  leading 
commodities,   for   example, 
iron  and  steel  articles,  coal, 
lumber,    grain,    flour,    hay, 
and  sugar,  during  the  pe- 
riods above  mentioned.*' 


ADOPTED. 

Ttiis  resolution  was 
not  answered. 

Resolved,  That  the  Inter- 
state Commerce  Commis- 
sion is  hereby  directed  to 
furnish  the  Senate  as  speed- 
ily as  may  be  practicable, 
a  report  showing  the  prin- 
cipal changes  in  railway 
tariff  rates,  whether  result- 
ing from  the  adoption  of 
new  rates  or  the  amend- 
ment of  freight  classifica- 
tions, and  an  estimate  of 
the  effect  of  such  changes 
upon  the  gross  and  net 
revenues  of  railway  cor- 
porations in  the  United 
States,  during  each  of  the 
fiscal  years  ending  June 
30,  1900,  1901,  1902,  and 
1903,  as  compared  with 
the  gross  and  net  revenues 
that  would  have  been  de- 
rived by  them  under  the 
rates  and  freight  classifica- 
tions in  force  during  the 
fiscal  year  ending  June  30, 
1899;  and  also  report  the 
changes  in  cost  of  opera- 
tion  and  maintenance  of 
said  railways  for  said  years 


102 


The  words  in  italics  in  the  resolution  that  was  not 
adopted,  as  printed  above,  were  omitted  in  the  resolu- 
tion as  finally  passed  and  those  printed  in  italics  in  the 
latter  were  not  in  the  former.  Yet  Document  No.  257 
replies  to  all  the  ultimately  omitted  inquiries  of  the 
unadopted  resolution  and  affords  no  answer  to  the 
inquiries  added  to  the  resolution  that  passed.  The 
Commission's  ''Preliminary  report  on  the  income 
account  of  railways,"  for  the  fiscal  year  1903,  is  dated 
December  12,  1903,  and  shows  that  the  operating  ex- 
penses of  ''about  98  per  cent"  of  the  railway  mileage 
of  the  country  for  the  fiscal  year  1903  was  $1,248,- 
520,483,  or  $391,551,484  more  than  the  cost  of  operating 
all  the  railways  in  1899.  Yet  the  Commission,  while 
inserting  in  Document  No.  257,  which  is  dated  March 
24,  1904,  figures  for  freight  tonnage  and  earnings 
which  cover  but  98  per  cent  of  the  existing  mileage, 
failed  to  include  the  expenses  of  operation  for  1903, 
asked  for  by  the  resolution,  and  explained  the  omis- 
sion by  the  statement  that  they  had  "not  yet  been 
compiled." 

HAY.  The  Commission  contends,  in  Document  257 
that,  although  data  regarding  the  traffic  movement 
of  particular  commodities  are  very  meager,  it  is  possible 
to  obtain  from  them  estimates  of  the  importance  of 
advances  on  certain  articles  which,  to  quote  the  lan- 
guage of  the  Commission,  "while  considerably  at 
variance  with  the  actual  figures,  were  they  obtainable, 
will  give  a  fair  idea  as  to  the  increase  in  revenue  result- 
ing from  an  advance  in  rates  on  such  articles. '^  The 
probable  extent  of  the  "variance"  from  actuality  and 
the  Commission's  comprehension  of  a  "fair  idea"  may 
be  given  definite  value  by  an  examination  of  the  process 
by  which  the  report  arrives  at  the  conclusion  that 
advanced  rates  on  hay  cost  the  shippers,  in  Official 
classification    territory,     of    that     article,     $2,434,384 

103 


during  the  fiscal  year  1902.  The  Commission's  estimate 
starts  with  the  fact  that  the  railways  of  the  United 
States  carried  4,681,509  tons  of  hay  during  the  year 
which  ended  with  June  30^  1902.  It  is  assumed  that 
sixty-five  per  cent  of  this  tonnage  moved  in  Official 
classification  territory  and  that  the  advance  amounted 
to  eighty  cents  per  ton.  The  assumption  that  sixty-five 
per  cent  of  all  hay  moved  by  rail  during  the  year  was 
affected  by  the  advance  in  this  territory  rests  solely 
upon  the  fact  that  sixty-five  per  cent  of  the  general 
tonnage  originates  in  this  region.  But  so  strangely  did 
the  Commission  misuse  its  own  figures  that  it  ignored 
the  fact  that  the  very  page  of  its  statistical  report  for 
1902  which  show^s  that  about  sixty-five  per  cent  of  all 
tonnage  originating  in  Official  classification  territory  also 
shows  that  only  32.65  per  cent  of  ''products  of  agri- 
culture," of  which  hay  constitutes  a  subclass,  originates 
in  that  region.  Again,  the  estimate  that  the  advance 
amounted  to  eighty  cents  per  ton  is  in  contradiction  of 
sworn  testimony  of  experts  to  be  found  in  the  Com- 
mission's records  to  the  effect  that  the  advance  did  not, 
on  the  average,  exceed  forty  cents  per  ton.  Supplying 
these  corrections  we  have: 


ITEMS 

The  Com- 
mission's 
estimate 

The  correct 
figures 

Number  of  tons  of  hay  carried  in  the 
United   States   in   the    fiscal    year 
1902 

4,681,509 

65.00 

3,042,980 

$0.80 
12,434,384 

4,681,509 

Percentage  probably  carried  in  Offi- 
cial classification  territory 

Number  of  tons  probably  carried  in 
Official  classification  territory  .... 

Average    increase   in    rates    per   ton 
carried 

32.65 

1,528,513 

$0.40 

Increased  revenues  from  hay 

$611,405 

104 


Thus  a  reasonable  estimate  of  the  effect  of  the 
advance  in  question,  an  advance  that  has  subsequently 
received  the  approval  of  a  Circuit  Court  of  the  United 
States,  indicates  that  it  actually  produced  but  little 
more  than  one-fourth  of  the  revenue  which  the  Commis- 
sion erroneously  estimated.  The  same  methods  of 
analysis  show  that  the  Commission's  estimate  that  since 
January  1,  1900,  the  increased  revenue  due  to  the  ad- 
vance in  hay  rates  amounted  to  ''nearly  $10,000,000" 
ought  to  be  reduced  to  less  than  $2,500,000.  But  assum- 
ing the  Commission's  figures  to  be  correct,  it  is  worth 
while  to  see  what  the  situation  of  the  producer  of  hay 
was  as  compared  with  his  situation  before  the  rate  was 
advanced.  The  United  States  Department  of  Agri- 
culture carefully  investigates  the  farm  values  of  all  the 
principal  agricultural  products  at  the  close  of  each  year. 
These  investigations  shoAv  that  hay,  on  the  farms  of 
the  United  States,  was  worth  to  its  producers  an  average 
of  $6.00  per  ton  in  1899,  and  had  advanced  by  De- 
cember 1,  1901,  to  $10.01  per  ton.  Thus  the  farmers 
gained  by  increased  prices  a  great  deal  more  than  they 
would  have  lost  even  had  the  imaginary  increase  in 
freight  charges  reported  by  the  Commission  been 
actually  taken  entirely  out  of  their  pockets.  The 
following  table  shows  the  difference  between  the 
imaginary  losses  and  the  real  gains: 


Gain  to  pro- 

Commis- 

Loss to  pro- 

ducers on 

sion's  esti- 

ducers had 

account  of 

mate  of 

they  paid  all 

higher 

Excess  of 

tonnage 

of  an  ad- 

prices than 

real     gain 

YEAR 

affected 

vance  m 

those  in 

over  imagin- 

by in- 

freight of 

eflFect  just 

ary  loss 

crease  in 

eighty  cents 

before  rates 

rates 

per  ton 

were  ad- 
vanced 

1900 

2,672,860 

$2,138,288 

$  3,394,532 

$   1,256,244 

1901 

2,656,355 

2,125,084 

7,676,866 

5,551,782 

1902 

3,042,980 

2,434,384 

12,202,350 

9,767,966 

Total. .  . 

8,372,195 

$6,697,756 

$23,273,748 

$16,.575,992 

105 


In  other  words,  the  increased  prices  of  the  three 
years,  1900,  1901  and  1902,  made  8,372,195  tons  of 
hay  on  the  farms  worth  $23,273,748  more  than  at 
former  prices,  which  is  an  actual  increase  in  value  3.47 
times  as  great  as  the  Commission's  imaginary  increase 
in  the  cost  of  railway  freight.  The  hay  crop  of  1899  in 
the  United  States  exceeded  in  volume  that  of  either 
1900,  1901,  1902  or  1903,  but  the  records  of  the 
Department  of  Agriculture  show  that  the  crop  of  each 
of  the  later  years  greatly  exceeded  that  of  1899  in  farm 
value.  The  augmentation  of  the  value  of  their  hay 
crops  to  the  farmers  of  the  United  States  on  account  of 
higher  prices  and  notwithstanding  diminished  pro- 
duction amounted,  from  1900  to  1903,  inclusive,  to 
$402,438,899.  By  the  side  of  this  vast  sum  an  advance 
in  freight  of  forty  cents  per  ton  on  one-third  of  the  hay 
moved  by  railways  appears  insignificant. 

DOCUMENT  No.  257  UNFAIR.  Unless  it  was  for 
the  purpose  of  obtaining,  regardless  of  an  accurate 
basis  of  measurement,  the  highest  statement  that  could 
be  put  forth  of  the  alleged  advance  in  rates  it  is  im- 
possible to  discover  any  adequate  reason  for  the  aban- 
donment by  the  Interstate  Commerce  Commission,  in 
the  preparation  of  Document  No.  257,  of  the  customary 
measure  of  traffic  movement,  which  is  the  ton-mile.  To 
state  the  traffic  movement  of  any  period  in  ton-miles  is 
to  give  a  figure  in  which,  distance  as  well  as  weight  is 
accorded  recognition.  The  distance  factor  varies; 
between  1899  and  1903  the  average  distance  traversed 
by  the  tonnage  used  in  the  Commission's  estimate 
increased  from  128.85  miles  to  132.80  miles,  or  3.07 
per  cent.  To  ignore  the  increased  service  per  unit 
of  weight,  as  the  Commission  did  when  it  chose  the 
uncertain  and  varying  ton  unit  of  service,  is  to  leave 
distance    out    of   the    account    although    it    is    clearly 

106 


a  factor  of  primary  importance.  The  total  railway 
freight  movement  of  1903  was  equal  to  carrying 
173,221,278,993  tons  one  mile.  The  average  railway 
receipts  from  freight  per  ton  per  mile  was  7.63  mills, 
or  0.39  mill  higher  than  in  1899.  Multiplying  the 
ton-mileage  of  1903  by  this  difference  between  the 
average  rates  of  1899  and  1903  gives  $67,556,299, 
which  is  the  extreme  amount  that  can  be  assigned  as 
an  addition  to  the  gross  receipts  of  the  railways  by 
reason  of  the  nominally  higher  average  rate  obtained 
in  19Q3. 


THE  COMMISSION'S  DUTY  TO  DECIDE  ON 
THE  FACTS.  The  Interstate  Commerce  Commission, 
under  the  present  law,  has  authority  to  make  findings 
of  fact  that  will  not  be  set  aside  unless  palpable  error 
can  be  shown.  If  it  would  stop  trying  to  legislate 
and  issue  lawful  orders  based  on  facts  properly  found, 
there  would  be  no  further  demand  for  new  legisla- 
tion. Nothing  is  plainer  than  the  tendency  of 
the  courts  to  throw  back  upon  the  Commission  the 
burden  of  ascertaining  and  interpreting  the  facts  in 
regard  to  complaints;  and  the  conclusion  that  its 
findings  are  those  of  an  especially  expert  body,  entitled 
to  great  weight  and  not  too  rigidly  to  be  reviewed  or 
criticised  or  lightly  to  be  thrust  aside,  is  plainly-  to  be 
read  in  many  of  the  very  decisions  in  which  the  Com- 
mission's orders  have  been  rejected. 

The  Supreme  Court,  said  in  the  Social  case,  that: 

"The  reasonableness  of  the  rate  in  a  given  case 
depends  on  the  facts,  and  the  function  of  the 
Commission  is  to  consider  these  facts  and  give 
them  their  proper  weight." 

In  the  Import  Rates  case  it.  declared,  with  refer- 
ence to  the  conclusions  *' reached  by  the  Commission, 

107 


or  by  the  courts  below,  in  respect  to  what  were  proper 
rates,"  that  ''That  was  a  question  of  fact,  and  if  the 
inquiry  had  been  conducted  on  a  proper  basis  we 
should  not  have  felt  inclined  to  review  conclusions  so 
reached."  The  Commission  has  so  conducted  its  work 
that  in  one  of  the  latest  cases  decided,  the  Kearney 
case,  the  Circuit  Court  was  fully  justified  in  stating  that 
the  Commission  had  failed  to  make  any  finding  of  fact 
which  would  sustain  its  order. 

EVADING  ITS  DUTY.  The  Interstate  Commerce 
Commission  has  persistently  shirked  its  legal  duty  to 
investigate  minutely  the  facts  pertaining  to  cases 
brought  before  it.  It  has  preferred  to  attempt  to 
enforce  fantastic  interpretations  of  the  la^w.  Thus 
has  it  created  whatever  sentiment  exists  in  favor  of 
radical  legislation  by  demanding  that  the  law  be  made 
to  mean  what  it  erroneously  declared  it  did  mean. 
In  the  Behlmer  case  (175  U.  S.  648),  the  Supreme  Court 
spoke  of  the  Commission  as  follows: 

''That  body,  from  the  nature  of  its  organization 
and  the  duties  imposed  upon  it  by  the  statute,  is 
peculiarly  competent  to  pass  upon  questions  of 
fact  of  the  character  here  arising." 

The  foregoing  was  quoted  by  the  Supreme  Court  in 
deciding  the  Chattanooga  case  (181  U.  S.,  1),  and  the 
court  asserted  that  it  had 

"steadily  refused  *  *  *  to  exert  its  original 
judgment  upon  the  facti,  where,  under  the  statute, 
it  was  entitled,  before  approaching  the  facts,  to 
the  aid  which  must  necessarily  be  afforded  by  the 
previous  enlightened  judgment  of  the  Commission 
upon    such    subjects." 

In  the  Georgia  Commission  cases  (181  U.  S.,  29) 
the  Supreme  Court  found  that  the  Commission  had 
"postponed  the  performance  of  its  duty"  and  had 
made  no  investigation  of  the  facts. 

108 


THE  COMMISSION  DERELICT  SAYS  THE 
COURT.  In  its  decision  in  the  Nashville  Coal  case, 
rendered  on  April  17,  1896,  the  Circuit  Court  declared 
that  the  Commission  is  to  be  regarded  as  a  body  of 
experts  in  transportation  problems  and  that: 

''This  gives  to  the  Commission's  finding  and 
opinion  great  weight,  and  entitles  it  to  great  con- 
sideration, both  by  the  parties  affected  and  by  the 
courts,  when  called  upon  to  enforce  obedience 
to  its  mandates." 

But  after  voicing  this  opinion  the  court  was  com- 
pelled to  say  that  in  the  case  before  it  the  Commission's 
report  and  findings  did  not  lay  before  the  court  the 
definite  and  distinct  information  necessary,  that  it 
made  but  "a  passing  allusion"  to  ''the  main  issue"  of 
fact,  and  that,  in  consequence,  the  Commission's 
investigation  and  opinion  could  not  have  the  value 
which  conformity  to  the  purpose  of  Congress  would 
have  insured. 

THE  COMMISSION  DEFEATED  REPEATEDLY 
IN  THE  COURTS.  Forty-five  cases  in  which  the 
railways  have  declined  to  obey  the  orders  of  the  Com- 
mission have  gone  to  the  courts.  Some  of  them  have 
been  withdrawn;  some  have  been  prosecuted  with  so 
little  diligence  by  the  complainant,  usually  the  Com- 
mission, that  for  years  they  have  remained  undecided, 
and  there  are  a  few  which  have  been  so  lately  entered 
upon  the  dockets  that  there  has  not  yet  been  time  for 
their  consideration  and  determination.  The  number  of 
cases  which  have  been  decided  is  35,  and  in  only  two  of 
these  has  a  final  decree  enforcing  the  orders  of  the 
Commission  been  secured;  in  one  other  the  Supreme 
Court  decided  to  enforce  a  part  of  the  Commission's 
order.  In  its  response,  dated  May  1,  1905,  to  the 
Senate  resolution  of  January  16,  1905,  the  Commission 
attempted   to   make   the   record   appear   more   to    its 

109 


credit  and  claimed  to  have  had  its  orders  sustained  by 
the  courts  in  three  cases  in  which  it  decided  that  rates 
were  excessive  and  in  eight  cases  in  which  it  decided 
that  they  were  unjustly  discriminatory.  In  order  to 
make  up  the  eight  cases,  however,  the  Commission 
included  the  three  cases  given  under  the  first  head,  so 
that  the  real  total  claimed  is  eight  and  not  eleven.  But 
this  is  not  all.  Five  of  the  eight  cases  can  not  properly 
be  counted  at  all.  In  four  of  them  there  were  no  court 
decisions  and  in  one  other  the  decision  was  merely  on  a 
motion  to  dismiss  and  the  merits  of  the  case  were 
never  subjected  to  judicial  investigation.  These  cases 
are  included  by  the  Commission  because  the  defendant 
carriers  saw  fit,  while  they  were  pending,  to  take  action 
satisfactory  to  the  complainants.  The  absurdity  of 
treating  them  as  cases  in  which  orders  have  been  sus- 
tained by  the  courts  is  evident  when  it  is  noted  that  it 
resulted  in  including  one  order — that  in  the  Colorado 
Fuel  and  Iron  case — under  both  heads  as  having  been 
both  sustained  and  disapproved  by  the  courts.  In 
fact,  this  single  order  appears  three  times  in  the  Com- 
mission's summary,  and  it  is  difficult  to  discover  why 
it  did  not  appear  four  times,  for  as  it  was  counted  under 
the  respective  heads  of  ''excessive  rates"  and  "unjust 
discrimination"  among  the  ''sustained"  orders  it  is 
rather  strange  that  the  Commission  thought  it  should 
be  counted  but  once,  under  "excessive  rates,"  among 
the  orders  "not  sustained.''  In  fact,  the  final  decree 
of  the  Federal  courts  was  against  this  order. 

SOME  CONTESTED  DECISIONS  OF  THE  COM- 
MISSION. Possibly  some  one  may  suppose  that  the 
decisions  of  the  Commission  which  have  been  con- 
tested successfully  in  the  courts  have  involved  broad 
questions  of  elementary  justice  and  that  the  legal  im- 
pediments to  the  enforcement  of  these  orders  have 
interfered  with  the  "square  deal"  essential  to  equality 

110 


of  industrial  opportunity.  Reference  to  a  few  of  the 
contested  cases  may  show  the  falsity  of  this  impression. 
Passenger  rates  have  been  the  subject  of  controversy 
in  but  two  of  the  cases  in  which  the  courts  have  been 
appealed  to  for  the  enforcement  of  the  Commission's 
orders.  One  of  these  cases  was  that  of  a  negro  named 
Heard,  who  obtained  an  order  from  the  Commission 
directing  the  Georgia  Railroad  to  discontinue  prac- 
tices connected  with  the  use  of  so-called  ''Jim  Crow" 
cars,  which  were  regarded  as  unjustly  discriminating 
against  the  complainant.  This  case  was  withdrawn 
before  decision.  The  other  passenger  rate  case  is 
known  as  the  ''Party  Rate*'  case.  It  arose  through 
the  desire  of  one  railway  company  to  be  relieved  from 
one  phase  of  its  competition  with  a  rival  carrier.  The 
order  of  the  Commission  would  have  mitigated  the 
competition  in  the  desired  degree  had  not  the  court 
declined  to  enforce  it.  Three  of  the  cases  which  have 
gone  to  the  courts  have  related  to  transportation  prac- 
tices rather  than  to  rates.  One  of  these,  the  "  Orange 
Routing"  case,  appears  to  have  been  due  to  an  effort  on 
the  part  of  the  complainants  to  secure  the  continuance 
of  illegal  and  secret  deviations  from  the  published  rate 
schedules,  by  parties  other  than  the  defendants,  which 
amounted  to  rebates.  At  least  this  was  asserted  in  the 
strong  dissenting  opinion  of  the  Chairman  of  the  Com- 
mission. The  Circuit  Court  has  decided  this  case  in 
favor  of  the  enforcement  of  the  Commission's  order,  but 
an  appeal  is  now  pending.  Another  case  of  this  char- 
acter, the  "Cartage"  case,  was  prompted  by  the  desire 
of  one  railway  to  weaken  a  competitor.  In  this  effort  the 
carrier  was  able  to  secure  the  co-operation  of  the  Com- 
mission, but  again  its  decision  did  not  survive  judicial 
scrutiny.  The  Circuit  Court  called  attention  to  the  ad- 
mission of  the  counsel  for  the  complainants  before  the 
Commission,  that  the  complainant  had  no  real  griev- 

111 


ance  but  had  been  instigated  in  making  eomplaint  by  a 
railway  which  was  paying  the  expense  of  the  litigation, 
and  the  Circuit  Court  of  Appeals  noted  that  the  effect 
of  enforcing  the  order  would  practically  deprive  the 
defendant  of  its  ability  to  compete  with  the  rival 
which  was  responsible  for  the  complaint.  Another  of 
these  cases  was  brought  at  the  instance  of  a  railway 
which  desired  to  be  relieved  from  a  contract  that  it  had 
entered  into  with  other  railways,  and  to  force  the 
latter  to  provide,  at  their  own  expense,  facilities  for 
bringing  about  that  result.  The  Circuit  Court,  which 
refused  to  enforce  the  Commission's  order,  declared 
this  to  be  the  fact,  and  asserted  that  the  Interstate 
Commerce  law  "was  never  intended  to  invade  the 
domain  of  private  contracts  between  common  carriers, 
which  were  valid  when  made,  and  are  not  in  conflict 
with  the  provisions  of  the  law.'' 

THE    COMMISSION   WRONG   ON   THE   FACTS. 

The  attempted  answer  to  those  who  recite  the  repeated 
reversals  of  the  Interstate  Commerce  Commission  by 
the  courts  is,  in  effect,  that  what  the  Commission  has 
tried  to  accomplish  ought  to  be  accomplished,  and 
that  if  the  courts  have  properly  construed  the  law,  the 
law  is  wrong.  This  contention  was  recently  stated 
with  admirable  clearness  and  conciseness  by  Mr.  Com- 
missioner Clements.  Addressing  the  Committee  on 
Interstate  and  Foreign  Commerce  of  the  House  of 
Representatives  on  January  25,  1905,  he  said: 

*'*  *  *  It  is  not  fair  to  array  these  cases  here 
as  cases  in  which  the  court,  upon  the  facts,  upon 
the  merits  and  equities  and  justice  of  the  case,  has 
overturned  the  Commission  29  or  30  times  out  of 
35,  when  in  reality  these  cases  went  off  solely  upon 
construction  of  the  law,  which  demonstrated  vital 
defects  in  this  regulating  statute." 

The  answer  to  this  argument  is  to  be  found  in  the 
decisions  themselves.     A  study  of  the  opinions  of  the 

112 


courts  in  the  thirty-two  reversals  which  the  Commission 
has  sustained  affords  little  support  for  the  assumption 
that  the  conclusion  would  have  been  different  in  any 
one  of  them  even  had  the  Commission  undeniably 
possessed  the  powers  for  which  it  now  asks.  With 
regard  to  many  of  them  it  is  exceedingly  difficult  to 
see  how  any  one  who  had  given  them  careful  study 
could  reach  the  conclusion  that  they  ''went  off  solely 
upon  construction  of  the  law."  This  surely  was  not  the 
reason  for  the  reversal  of  the  Commission  in  the  San 
Bernardino  case  (50  Fed.  Rep.,  295),  in  which  the 
court  said  that: 

''The  facts    *    *    *    a^e  widely  different  from 
those  set  out  in  the  report  of  the  Commission." 

Nor  in  the  Coxe  case  (74  Fed.  Rep.,  784),  in  which 
the  court  expressed  radical  disagreement  with  the 
Commission  as  to  the  facts  involved,  saying: 

"The  Commission's  estimate    *   *    *    rests  upon 
an  erroneous  principle  and  is  unreliable." 

In  many  other  cases,  including  the  very  recent 
Kearney  case,  it  is  clear  that  there  would  have  been 
the  same  decision  even  under  such  a  statute  as  that 
proposed.    In  the  Kearney  case  the  court  said: 

"It  is  to  be  observed  further  that  while  there  is 
no  finding  of  fact  in  this  case  upon  which  the  order 
of  the   Commission   can   be   based,   the   evidence 
itself  is  not  believed  to  be  sufficient  to  support  the 
order.    The  evidence  before  the  court,  on  the  con- 
trary, appears  to  be  sufficient  to  support  a  finding 
that  the  Kearney  rate  in  and  of  itself  was  and  is 
reasonable." 
Yet  Interstate  Commerce  Commissioner  Prouty  told 
the  Senate  Committee  on  Interstate  Commerce  during 
the  last  week  of  its  sessions  that  the  Commission  had 
never  "been  overruled  by  the  Supreme  Court  of  the 
United  States  on  a  question  of  fact."     No  doubt  when 
the  statement  was  made  the  Commissioner  had  for- 

113 


gotten  that  in  deciding  against  the  Commission  in  the 
Cattle  Raisers'  case  (186  U.  S.,  320)  the  Supreme 
Court  said: 

"Being  then  constrained  to  the  conclusion  that 
the  order  of  the  Commission  was  not  sustained  by 
the  facts  upon  which  it  was  predicated,  we  can  not 
enter  into  an  independent  investigation  of  the 
facts,  even  if  it  be  conceded  the  record  is  in  a  con- 
dition to  enable  us  to  do  so,  in  order  that  new 
and  substantive  findings  of  fact  may  be  evolved, 
upon  which  the  order  of  the  Commission  may  be 
sustained/' 

Something  like  a  disagreement  with  the  Commission's 
view  of  the  facts  seems  also  to  have  been  expressed  by 
the  Supreme  Court  when,  in  the  Import  Rate  case, 
(162  U.  S.,  197),  it  said: 

"The  effort  of  the  Commission,  by  a  rigid  general 
order,  to  deprive  the  inland  consumers  of  the 
advantage  of  through  rates,  and  to  thus  give  an 
advantage  to  the  traders  and  manufacturers  of  the 
large  seaboard  cities,  seems  to  create  the  very 
mischief  which  it  was  one  of  the  objects  of  the  act 
to  remedy." 

LONG  AND  SHORT  HAUL  CASES.  In  most  of  the 
cases  in  which  appeal  has  been  unsuccessfully  made  to 
the  courts  to  enforce  its  orders  the  Commission  has 
attempted  to  control  adjustments  among  freight  rates. 
Roughly  speaking,  these  are  of  two  classes:  Those  in 
which  the  whole  question  has  been  that  of  absolute  or 
relative  reasonableness  under  the  first  or  third  sections 
of  the  act,  and  those  in  which  the  question  has  arisen 
under  the  fourth,  or  long  and  short  haul  clause,  which 
considerably  exceed  the  others  in  number.  If  in  any  of 
these  cases  there  were  unjust  relations  which  might 
have  been  relieved  through  the  lawful  action  of  the 
Commission,  that  body  adopted  an  erroneous  inter- 
pretation of  the  law,  which  prevented  the  beneficial 
results  that  might  have    followed  action  clearly  within 


its  authority.  .  In  many  of  these  cases  the  courts  have 
also  indicated  that  the  Commission's  orders  were  not 
justified  by  the  facts.  The  only  case  under  the  fourth 
section  which  can  be  regarded  as  an  exception  to  this 
rule  is  the  "San  Bernardino"  case — decided  by  the 
Commission  while  it  adhered  to  the  rule  laid  down  by 
Judge  Cooley,  with  the  unanimous  approval  of  his 
colleagues  as  members  of  the  original  Commission — 
that  the  carriers  must  judge  for  themselves  in  each 
instance  whether  there  are  dissimilar  circumstances 
and  conditions  which  permit  exceptions  to  the  general 
rule  that  there  shall  be  no  higher  charge  for  inter- 
mediate hauls  than  for  longer  hauls  over  the  same  line 
in  the  same  direction,  when  the  latter  include  the 
former.  From  its  organization  in  1887  until  November, 
1892,  the  Commission  adhered  to  the  rule  just  referred 
to,  which  was  formulated  in  the  first  important  case 
that  arose  under  the  fourth  section.  Later  in  deciding 
the  Georgia  Commission  cases  the  Commission  aban- 
doned this  rule,  so  far  as  it  related  to  the  competition  of 
interstate  railways  located  in  the  United  States,  and 
declared  that  where  the  dissimilarity  of  circumstances 
relied  on  to  justify  exceptions  to  the  general  rule  were 
the  consequence  of  such  competition,  dissimilarity 
could  not  be  set  up  as  a  defense  to  a  complaint  of 
violation  of  the  law,  but  must  be  made  the  basis  of  an 
application  to  the  Commission  for  permission  to  make 
the  greater  charge  for  the  intermediate  haul.  After 
adopting  this  interpretation  of  the  law,  the  Commission 
for  a  number  of  years  declined  to  consider  evidence 
tending  to  prove  the  existence  of  dissimilar  conditions 
arising  out  of  the  competition  of  interstate  railway 
carriers  or  of  different  markets,  thus  preventing  the 
introduction  of  testimony  which  the  courts  have 
declared  to  be  of  controlling  importance.  It  is  true 
that  this   erroneous  interpretation  of  the  law   has 

115 


prevented  the  enforcement  of  the  orders  in  some  of 
these  cases,  but  it  is  equally  true  that  the  Commission 
never  expected  obedience  to  them,  and  that  they  are 
to  be  regarded  as  strategic  moves  in  a  combat  which 
the  Commission  proposed  to  conduct  along  the  lines 
that  it  hoped  would  force  the  carriers  to  appeal  to  it 
for  relief.  There  seems  to  be  ample  justification,  not 
only  in  the  case  to  which  it  was  applied,  but  in  most  of 
these  cases,  for  the  observation  of  the  Supreme  Court, 
in  deciding  the  Chattanooga  case,  that  in  making  its 
order  "the  Commission  thought  that  literal  enforce- 
ment would  bring  about  an  injustice."  In  fact,  before 
making  some  of  them  the  Commission  allowed  an 
interval  to  elapse  for  the  avowed  purpose  of  permitting 
applications  for  relief,  and  it  provided  for  the  suspension 
of  several  of  the  orders  after  they  were  made  in  case 
such  applications  should  be  made.  In  many  of  these 
cases  the  courts  distinctly  expressed  the  view  that  there 
was  no  injustice  in  the  rate  relations  which  were  made 
the  subject  of  complaint,  and  that  there  can  be  no  con- 
troversy over  the  suggestion  that  their  enforcement 
would  have  brought  injustice.  There  is  probably  no 
one  of  these  cases  in  which  the  enforcement  of  the 
Commission's  orders  would  directly  have  modified  the 
rates  actually  paid.  The  carriers  affected  might  have 
been  compelled  to  withdraw  their  competition  for  the 
long-haul  traffic,  but  it  is  not  at  all  likely  that  in  any 
case  they  could  have  afforded  to  reduce  their  inter- 
mediate rates  to  the  level  fixed  by  competition  at  the 
terminals.  In  a  few  more  recent  cases  the  Commission 
has  recognized  the  illegality  of  its  former  efforts  and  has 
given  what  it  has  regarded  as  sufficient  consideration  to 
competition  of  the  character  formerly  declared  to  be 
without  effect  as  a  defense.  In  these  cases,  however, 
the  Commission  appears  to  have  fallen  into  the  error  of 
imagining  that  it  was  the  purpose  of  the  law  to  deprive 

116 


certain  communities  of  natural  advantages  of  location 
which  enable  them  to  enjoy  the  services  of  great  and 
competing  routes  of  transportation  by  land  or  by  water, 
or  by  both.  The  Griffin  case  is  typical.  The  court  said 
that  the  enforcement  of  the  Commission's  order, 
would,  as  its  first  effect,  '' immediately  disorganize  and 
disarrange  the  entire  commerce  of  which  Macon  is  the 
receiving  and  distributing  point,"  and  that  it  would  do 
this  without  material  benefit  to  the  producers  and  con- 
sumers at  Griffin,  although  'Hhe  commerce  of  Macon 
would  be  destroyed  in  exact  proportion  with  its  ability 
to  meet  the  prices  of  its  competitors." 

LAW  AGAINST  REBATES.  All  devices  in  the 
nature  of  rebates  are  absolutely  prohibited  by  Federal 
law,  and  have  been  so  prohibited  for  nearly  eighteen 
years.  The  language  of  the  statute  is  broad  enough 
to  cover  any  conceivable  device,  whether  by  under- 
billing,  underw^eighing,  false  classification,  excessive 
payments  for  the  use  of  shippers'  cars,  unreasonable 
allowances  to  terminal  railways  or  otherwise.  The 
law  on  this  subject  was  materially  strengthened  by  the 
Elkins  Act,  approved  on  February  19, 1903,  which  reads 
in  part  as  follows: 

u*  *  *  *  and  it  shall  be  unlawful  for  any 
person,  persons,  or  corporation  to  offer,  grant,  or 
give,  or  to  solicit,  accept  or  receive  any  rebate, 
concession,  or  discrimination  in  respect  of  the 
transportation  of  any  property  in  interstate  or 
foreign  commerce  by  any  common  carrier  subject 
to  said  Act  to  regulate  commerce  and  the  Acts 
amendatory  thereto,  whereby  any  such  property 
shall  by  any  device  whatever  be  transported  at  a 
less  rate  than  that  named  in  the  tariffs  published 
and  filed  by  such  carrier,  as  is  required  by  said 
Act  to  regulate  commerce  and  the  Acts  amendatory 
thereto,  or  whereby  any  other  advantage  is  given 
or  discrimination  is  practiced." 

117 


Violation  of  the  foregoing  is  a  misdemeanor,  punish- 
able by  a  fine,  which  maj^  not  be  less  than  SI, 000  nor 
more  than  $20,000.  In  addition  to  these  penalties  the 
statute  places  in  the  hands  of  the  Interstate  Commerce 
Commission  a  most  powerful  instrument  for  the  en- 
forcement of  the  laws  providing: 

''That  whenever  the  Interstate  Commerce  Com- 
mission shall  have  reasonable  ground  for  belief 
that  any  common  carrier  is  engaged  in  the  carriage 
of  passengers  or  freight  traffic  between  given 
points  at  less  than  the  published  rates  on  file,  or 
is  committing  any  discrimination  forbidden  by 
law,  a  petition  may  be  presented  alleging  such 
facts  to  the  Circuit  Court  of  the  United  States, 
sitting  in  equity,  having  jurisdiction;  *  *  * 
whereupon  it  shall  be  the  duty  of  the  court  sum- 
marily to  inquire  into  the  circumstances  upon  such 
notice  and  in  such  manner  as  the  court  shall  direct, 
and  without  the  formal  pleadings  and  proceedings 
applicable  to  ordinary  suits  in  equity,  *  *  * 
and  upon  being  satisfied  of  the  truth  of  the  allega- 
tions of  said  petition,  said  court  shall  enforce  an 
observance  of  the  published  tariffs  or  direct  and 
require  a  discontinuance  of  such  discrimination 
by  proper  orders,  writs  and  process.  *  *  *'* 
Thus  ''government  by  injunction '*  has  been  invoked 
in  aid  of  the  suppression  of  rebates.. 

SUFFICIENCY    OF    THE    ELKINS    LAW.      The 

Commission's  authority  as  extended  by  the  Elkins  law 
of  February  19,  1903,  is  sufficient  to  eradicate  every  case 
of  unjust  discrimination  from  the  published  tariffs. 
By  this  Act  it  is  provided, "That  whenever  the  Inter- 
state Commerce  Commission  shall  have  reasonable 
ground  for  belief  that  any  common  carrier  *  *  *  is 
committing  any  discriminations  forbidden  by  law," 
application  may  be  made  to  the  proper  Circuit  Court 
sitting  in  equity  which  shall  "direct  and  require  a  dis- 
continuance of  such  discrimination  by  proper  orders, 
writs,  and  process."     An  opportunity  to  declare  the 

118 


evident  and  quite  unmistakable  meaning  of  the  fore- 
going occurred  with  unusual  promptness,  and  on  March 
9,  1903,  deciding  the  case  of  the  Missouri  Pacific 
Railway  v.  United  States  (189  U.  S.,  274),  the  Supreme 
Court  said: 

"The  violation  of  the  Act  to  regulate  commerce, 
complained  of  in  the  amended  bill  was  an  asserted 
discrimination  between  localities.  *  *  *  Bear- 
ing in  mind  that,  prior  to  the  request  of  the  Com- 
mission upon  which  the  suit  was  brought,  no 
hearing  was  had  before  the  Commission  concerning 
the  matters  of  fact  complained  of,  and  therefore  no 
finding  of  fact  whatever  was  made  by  the  Cora- 
mission,  and  it  had  issued  no  order  to  the  carrier 
to  desist  from  any  violation  of  the  law  found  to 
exist,  after  opj)ortunity  afforded  to  it  to  defend, 
the  question  is  whether,  under  such  circum- 
stances, the  law  officers  of  the  United  States  at 
the  request  of  the  Commission  were  authorized  to 
institute  this  suit.  *  *  *  Power  to  prosecute 
a  suit  like  the  one  now  under  consideration  is 
expressly  conferred  by  an  Act  of  Congress,  adopted 
since  this  cause  was  argued  at  bar — that  is,  the  Act 
Ho  further  regulate  commerce  with  foreign  nations 
and  among  the  States,'  approved  February  19, 
1903." 

Yet  the  Commission  has  persistently  ignored  the 
machinery  for  the  correction  of  unjust  relations  among 
rates  thus  placed  at  its  disposal  by  Congress,  and  in  its 
annual  report  for  1903,  dated  eight  months  after  the 
decision  just  quoted  was  rendered,  it  declared  that 
although  the  remedy  by  injunction  was  ''in  terms  made 
applicable  to  any  discrimination  forbidden  by  law,  it 
is  at  least  doubtful  whether  it  applies  to  discriminations 
which  are  the  result  of  adhering  to  published  rates." 
But  two  conclusions  are  possible  to  those  who  realize 
the  extent  of  the  powers  now  possessed  by  the  Inter- 
state Commerce  Commission.  Either  it  grossly  over- 
states the  extent  of  unjust  discrimination  in  tariS 

119 


rates,  or  the  prevalence  of  the  evils  which  it  proclaims 
should  have  led  to  the  wise  exercise  of  the  power  it 
has  permitted  to  lie  dormant.  In  other  words,  either 
the  Commission  and  the  other  advocates  of  govern- 
mental rate-making  misapprehend  the  present  situ- 
ation or  the  Commission  has  not  done  what  it  ought 
to  have  done.  If  this  is  so,  it  is  not  the  law  which 
has  failed  but  its  administration.  And  if  the  diffi- 
culty has  been  administrative  rather  than  legislative, 
the  reasonable  course  would  seem  to  be  to  recon- 
struct the  administrative  agency  rather  than  to 
reconstruct  the  law. 

PRESENT  EFFECTIVENESS  OF  THE  COM- 
MISSION. The  report  submitted  to  Congress  by  the 
Interstate  Commerce  Commission  in  December,  1904, 
shows  that  from  its  creation  on  February  4,  1887,  to 
December,  1904,  it  had  received,  all  told,  precisely 
4,012  complaints  against  railway  rates  and  railway 
methods.  This  is  an  average  of  something  over  200 
every  year.  But  3,223  of  these  complaints  are  classi- 
fied by  the  Commission  as  ''informal,"  and  were 
settled  under  the  existing  law  by  its  friendly  mediation. 
In  other  words,  in  these  3,223  cases  no  formal  com- 
plaint was  received,  no  formal  proceedings  were  insti- 
tuted, no  report  and  opinion  was  filed,  no  order  issued, 
no  litigation  ensued;  yet  every  one  of  them  was 
settled  to  the  mutual  satisfaction  of  those  concerned. 
The  remaining  789  cases  were  formally  presented  to 
the  Commission,  but  only  359  of  them  were  pressed  to 
final  determination  by  that  body.  It  is  impossible  to 
state  just  how  many,  but  there  are  probably  less  than 
70  of  these  cases  still  pending.  In  other  words,  al- 
most half  of  the  789  formal  complaints  have  been 
settled  by  agreement  between  the  parties  or  by  the 
withdrawal  of  the  complaint   before  the  Commission 

120 


has  had  time  to  investigate  and  decide.  Of  the  359 
cases  which  the  Commission  has  decided,  frequently- 
considering  two  or  more  of  them  together,  and  in  its 
whole  history  having  rendered  but  297  formal  decisions, 
194,  or  scarcely  more  than  one-half  of  the  total,  have 
been  decided  in  favor  of  the  complainants.  The 
balance  have  been  dismissed  because  there  was  no 
legal  ground  for  complaint.  In  the  194  cases  decided 
in  favor  of  the  complainants  the  Commission  has,  with 
a  few  exceptions,  issued  formal  orders  requiring  the 
carriers  to  change  their  rates  or  to  modify  their  regu- 
lations. Probably  about  65  per  cent  of  these  orders 
have  been  promptly  and  voluntarily  obeyed  by  the 
carriers  against  which  they  were  directed.  A  report, 
submitted  to  the  United  States  Senate  by  the  Com- 
mission on  December  21,  1896  (Senate  Doc.  No.  30, 
54th  Cong.,  2d  sess.),  shows  the  action  taken  in  107 
instances,  in  which  the  decision  of  the  Commission  was 
more  or  less  favorable  to  the  complainants.  From  this 
report  it  appears  that  in  58  of  the  107  cases  included 
there  was  complete,  voluntary  obedience  to  the  Com- 
mission's order.  In  11  more  there  was  voluntary, 
partial  obedience,  while  in  another  case  the  Commission 
reports  that  ''some  changes"  were  made.  It  is  to  be 
observed  concerning  these  12  cases  that  the  degree  of 
obedience  was  at  least  sufficient  to  prevent  further 
action  on  the  part  of  the  Commission  or  the  complain- 
ants. It  appears,  therefore,  that  in  107  cases  there 
were  only  37  in  which  the  defendants  declined  sub- 
stantially to  comply  with  the  Commission's  recom- 
mendations. Information  on  this  subject  is  brought 
to  a  later  date  by  the  statement  supplied  to  Senator 
Kean  by  the  Commission,  and  printed  on  pages  68  and 
69  of  the  "  Hearings  Before  the  Committee  on  Inter- 
state Commerce  of  the  Senate,"  of  April  19,  1905. 
This  statement   relates  to   60   cases   decided    between 

121 


December  3,  1887,  and  June  25,  1904,  "in  which  the 
Commission  found  rates  complained  of  to  be  unreason- 
able and  ordered  them  to  be  discontinued.''  It  shows 
that  in  26  cases  the  orders  of  the  Commission  were 
completely  obeyed  and  that  in  13  cases  they  were 
partially  obeyed,  As  no  suits  were  brought  in  any  of 
the  cases  in  which  the  obedience  is  described  as  ''par- 
tial," the  action  may  be  presumed  to  have  been  satis- 
factory to  the  complainants.  Of  the  21  cases  in  which 
the  orders  of  the  Commission  were  not  obeyed,  suits 
had  been  brought,  at  the  date  on  which  the  statement 
was  made,  in  19,  and  in  16  of  these  the  courts  had 
decided  that  there  were  no  lawful  orders,  that  the 
pseudo-orders  issued  had  no  legal  force,  and,  in  effect, 
that  they  ought  not  to  have  been  obeyed.  The  decision 
in  the  Freight  Bureau  cases  (167  U.  S.,  479),  which  the 
Commission  always  refers  to  as  having  established  the 
interpretation  of  the  law  to  the  effect  that  the  Com- 
mission has  no  rate-making  power  although  this  was 
in  fact  clearly  decided  more  than  a  year  before  in  the 
Social  Circle  case  (162  U.  S.,  184)  decided,  on  March  30, 
1896,  was  decided  on  May  27,  1897.  The  following 
table  shows  that  there  has  been  more  frequent  and 
more  complete  compliance  with  the  Commission's 
orders  since  that  date  than  before. 


ORDERS  REQUIRING  CHANGES  IN  RATES. 


Issued 

Num- 
ber- 
issued 

Number 

completely 

obeyed 

Number 
partiallv 
obeyed 

Percent- 
age wholly 
or  partly 

obeyed 

Before  May  27,  1897. 
After  May  27.  1897... 

41 
19 

15 
11 

11 
2 

63.41 
68.42 

Total 

60 

26 

13 

65.00 

We  come,  therefore,  to  this  conclusion:   That  out  of 
about    4,000    complaints    of    one    kind    and    another 

122 


brought  to  the  attention  of  the  Commission,  approxi- 
mately 3,900  have  been  adequatel}^  and  satisfactorily 
settled  under  the  law  as  it  exists  to-day.  Of  the 
remaining  100  cases  some  are  undoubtedly  still  pending, 
and  if  they  shall  be  decided  against  the  carriers  it  is 
reasonable  to  believe  that  in  most  cases  the  course 
recommended  by  the  Commission  will  be  promptly 
adopted  by  the  defendants.  The  traceable  remainder 
amounts  to  precisely  45  cases  in  which  the  Commission 
has  rendered  decisions  adverse  to  the  railroads,  which 
the  latter  have  refused  or  neglected  to  obey.  In  these 
cases  the  Commission  or  some  party  in  interest  has,  in 
accordance  with  the  procedure  provided  in  the  statute, 
sought  the  aid  of  the  United  States  courts  for  the 
enforcement  of  the  remedies  prescribed  by  the  Com- 
mission. These  45  cases  constitute  almost  precisely 
1.1  per  cent  of  the  total  number  of  complaints  which 
the  Commission  has  received.  Here,  then,  are  the 
actual  dimensions  of  the  evil  which  it  is  proposed  to 
remedy  by  conferring  upon  the  political  appointees  of 
the  President  power  to  write  into  every  contract  for 
transportation — and  of  these  contracts  there  are 
millions  every  day — the  most  important  item  in  that 
contract — the  price  for  which  the  transportation  is  to 
be  performed.  For  the  sake  of  1.1  per  cent  of  all  the 
complaints  received  in  connection  with  tlje  greatest 
American  industry  save  that  of  agriculture — and  the 
4,000  complaints  of  all  kinds  in  eighteen  years  is  to  the 
total  number  of  shipments  about  as  4,000  grains  of 
sand  to  the  seashore — for  the  sake  of  45  cases  in 
eighteen  years  of  American  industrial  achievement, 
it  is  proposed  to  inject  into  American  industry  a  new 
and  an  alien  force  and  to  deprive,  by  a  single  law,  the 
shipper  of  the  right  to  say  how  much  he  will  pay  and 
the  carrier  of  the  right  to  say  how  much  he  will  receive. 

123 


"THE  LAW  OF  THE  LAND."  The  law  of  the  land 
is  that  when  the  Commission  has  conducted  a  lawful 
investigation  and  issued  a  lawful  order  which  has  not 
been  obeyed  by  the  carrier  or  carriers  defendant,  it  is 
the  duty  of  the  Federal  courts  having  jurisdiction  to 
issue  a  decree  commanding  obedience.  When  suit  is 
brought  to  enforce  one  of  the  Commission's  orders 
there  are  only  two  questions  before  the  court,  and 
these  are: 

First.        Has  a  lawful  order  been  made  by  the  Com- 
mission? and 
Second.    Has  the  order  been  disobeyed? 

If  the  answers  to  both  questions  are  in  the  affirmative, 
no  discretion  and  no  latitude  of  action  is  left  to  the 
court.  It  must  require,  by  a  proper  decree,  prompt 
and  complete  obedience  to  the  Commission's  order, 
and  that  order  the  court  can  neither  modify,  alter,  nor 
abate.  Sixteen  cases  of  this  sort  have  been  brought  to 
the  attention  of  the  Supreme  Court  of  the  United 
States  and  fifteen  times  that  court  has  decided  that  the 
Commission  has  failed  to  make  a  lawful  order  and  that 
consequently  there  was  no  order  which  the  court  could 
enforce.  Twenty  cases,  in  addition  to  these,  have  been 
decided  by  the  lower  Federal  courts  and  eighteen  of 
them  adversely  to  the  Commission. 

A  SUCCESSFUL  STATUTE.  "There  appears  to 
be  a  disposition  in  some  quarters  to  discredit  the 
present  law  and  belittle  the  result  of  its  operations. 
It  has  been  described  as  a  crude  and  ill-considered 
measure,  which  has  made  little  advance  toward  the 
accomplishment  of  its  intended  purpose.  I  am  very 
far  from  having  any  sympathy  with  that  erroneous 
view.  On  the  contrary,  I  regard  the  Act  to  regulate 
commerce  as  one  of  the  most  important  and  benefi- 

124 


cent  statutes  ever  enacted  by. the  Congress  of  the 
United  States." — Testimony  of  Hon.  Martin  A.  Knapp, 
Chairman,  Interstate  Commerce  Commission,  Testimony, 
Interstate  Commerce  Committee,  U.  S.  Senate,  Vol.  IV, 
p.  S292. 


LEGISLATION  AS  A  PANACEA.  'When 
anything  goes  wrong  in  the  world,  or  seems  to  go 
wrong,  the  ignorant  and  thoughtless  everywhere 
rise  up  and  call  upon  the  Government  to  interfere, 
as  if  a  perfunctory  body,  made  up  of  agents, 
loosely  selected  at  best,  were  more  trustworthy 
than  the  masses,  from  whom  it  derives  life.  Gov- 
ernment interference  is  the  sine  qua  non  of  young 
people,  the  hopeful,  confiding,  and  simple.  It  is 
the  panacea  of  cranks  and  schemers.  It  is  never 
fully  adequate.  It  lacks  in  intelligent  interest, 
energy,  and  adaptability.  It,  moreover,  has  the 
effect  to  weaken  personal  interest  and  individual 
effort.  Its  substitution  for  private  effort  is  to 
trade  off  the  practical  experience  and  enthusiasm 
of  a  nation  for  the  service  of  hired  men.  *  *  * 
To  invest  Government  with  the  authority  to 
make  rates,  or  actively  to  interfere  with  other 
business  matters,  is  to  make  the  creative,  ag- 
gressive genius  of  a  nation  conform  to  the  con- 
tracted sphere  of  mechanical  action.  Such  a 
course  is  destructive.  *  *  *  The  untrammeled 
operation  of  railroads  is  necessary  to  the  freedom 
of  trade,  the  interchange  of  commodities,  the 
prosperity  of  business,  the  growth  of  a  country. 
We  can  not  wrap  them  in  the  cerements  of  mum- 
mies, or  chain  them  to  arbitrary  conditions,  and  ex- 
pect them  to  fulfill  the  vital  and  active  functions  of 
their  office.  If  untrammeled  they  will  effect  the 
widest  possible  interchange  of  traffic  between  the 
markets  of  a  country.  We  can  not  fix  the  rates 
they  shall  charge  in  accomplishing  this  end  in  the 
mechanical  manner  that  we  measure  lumber  or 
count  the  telegraph  poles  that  line  our  public 
highways.  They  must  be  determined  as  exi- 
gencies arise,  according  to  the  equities  of  trade. 
The  question  is  an  economic  one,  and  must  be  so 

126 


treated  byGovernjnents.  Whenever  Governments 
meddle  in  such  affairs,  their  action  (if  designed  to 
benefit  mankind)  will  be  exceedingly  moderate. 
It  will  be  suggestive  rather  than  mandatory." — 
Marshall  M.  Kirkman,  Basis  of  Railway  Rates, 
pp.  217,  210,  213. 

COMPLAINTS  ARE  INEVITABLE.  In  spite  of 
the  activity  with  which  railway  officers  are  constantly 
seeking  to  adjust  the  great  agencies  of  commerce  which 
they  direct  to  the  needs  of  American  industry,  it 
would  be  foolish  to  contend  that  changes  are  always 
made  with  the  most  desirable  promptitude  or  that 
those  which  are  made  are  always  perfectly  adapted  to 
the  situations  they  attempt  to  meet.  Omnipotence 
alone  could  attain  such  a  result.  But  the  measure  of 
the  complaint  which  is  heard  ought  not  to  be  mistaken 
for  the  measure  of  the  evil  which  exists.  There  is  no 
shipper  who  would  not  like  to  have  his  goods  carried 
for  lower  rates;  there  is  no  industry  which  would  not 
like  to  have  a  greater  share  of  the  burden  of  maintain- 
ing the  means  of  transportation  shifted  to  other  indus- 
tries; there  is  no  community  or  producing  region  which 
does  not  look  jealously  at  some  other  community  or 
producing  region,  wishing,  in  the  race  for  commercial 
supremacy,  itself  to  become  the  especial  beneficiary  of  a 
particularly  favorable  adjustment  of  railway  rates. 
New  York,  the  great  gateway  of  foreign  commerce, 
looks  covetously  at  the  relatively  small  percentage  of 
grain  exports  which,  at  a  rate  lower  than  New  York 
enjoys,  moves  through  the  port  of  Philadelphia,  and 
would  like  to  have  the  charges  to  both  ports  equalized, 
while  Philadelphia  looks  southward  to  Baltimore  and 
sees  no  reason  why  the  greater  differential  allowed  her 
southern  neighbor  should  not  be  vouchsafed  to  her. 
It  would  be  possible  to  continue  almost  indefinitely  the 
enumeration   of   rivalries   of  this   sort   which   lead  to 

126 


pressure  upon  railway  officers  for  reductions  and 
modifications  in  rates  and  occasionally  to  complaints, 
more  or  less  justifiable,  that  these  officers  have  failed  to 
create  the  particular  rate  adjustments  which  would 
most  promote  industrial  harmony  and  industrial 
progress.  Such  complaints  are  merely  the  expression 
of  that  economic  unrest  which  requires  constant  and 
rapid  improvement  in  all  industrial  relations  and  is  the 
mother  of  all  progress  in  productive  industry. 


MR.  S.  H.  COWAN,  ATTORNEY  FOR  THE 
TEXAS  CATTLE  RAISERS'  ASSOCIATION, 
CONDEMNS    THE    ESOH-TOWNSEND    BILL. 

"I  enclose  you  my  objection  to  the  Esch-Townsend 
bill.  I  hope  you  can  place  it  before  the  whole 
committee  and  have  it  printed.  The  people  will 
not  stand  for  any  such  makeshift.  I  hope  no  bill 
will  be  passed  if  this  is  the  best  they  can  do.'' — 
Letter  to  Senator  Elkins.  See  Testimony  before 
the  Committee  on  Interstate  Commerce,  U.  S.  Senate, 
Vol.  I,  p.  184. 

"I  sent  my  criticisms  on  that  bill  here.  I  think 
that  bill  would  be  practically  worse  than  no  law 
at  all.  I  know  a  great  many  think  otherwise,  but 
if  you  transferred  a  retrial  on  the  facts,  like  the 
case  I  have  tried  before  the  Commission,  I  would 
not  give  a  snap  for  the  law.  It  would  be  obnoxious 
and  harassing  to  the  railroads.  *  *  *  j  filed  a 
protest  here  because  I  believed  it  was  an  injurious 
measure." — Ibid.,  Vol.  4,  p.  34OO. 


RAILWAYS  OPPOSED  TO  REBATES.  "Under 
the  Elkins  law,  the  Commission  has,  I  think,  full 
power  to  do  away  with  all  secret  rebates.  Tariffs  of 
every  railroad  must  be  published,  made  open  to  the 
public,  to  the  competitors  of  every  such  railroad,  and 
be  maintained.  No  law  that  Congresa  could  pass, 
doing  away  with  the  secret  concessions  or,  as  they  are 
ordinarily  termed,  rebates,  could  be  too  severe  to  satisfy 

127 


the  majority  of  the  railway  managers  of  this  country." 
— Letter  of  H.  B.  Ledyard,  Chairman  of  the  Board, 
Michigan  Central  Railroad,  Interstate  Commerce  Com- 
mittee,  U.  S.  Senate,  Vol.  II,  p.  1432. 

LET  THERE  BE  NO  FALSE  PRETENCES.  The 

allegation  in  support  of  the  proposed  legislation,  that 
there  is  unjust  discrimination  among  purchasers  of 
transportation,  is  seriously  confused  by  the  misleading 
use  of  the  word  '^rebates."  There  is  nothing  in  the 
Esch-Townsend  bill  that  would  affect  rebates  except 
that  it  is  extremely  probable  should  such  a  measure 
be  enacted,  it  would  increase  the  incentive  to  cut 
below  the  schedule  rates.  A  rebate,  using  the  word 
in  its  broadest  sense,  is  any  device  by  which  one  shipper 
of  freight  is  afforded  service  for  a  smaller  payment 
than  is  accepted  from  some  other  shipper  for  a  like  and 
contemporaneous  service.  The  terms  of  the  measures 
now  under  consideration  make  them  wholly  inapplica- 
ble to  such  discriminations.  Their  only  purpose  is  to 
give  rate-making  power  to  a  political  body.  Clearly  it 
would  be  most  unfortunate  if  the  improper  and  inappro- 
priate use  of  a  term  of  such  sinister  suggestion  as  the 
word  *' rebate"  should  result  in  the  enactment  of  unwise 
laws  which  could  have  no  relation  or  application  to  the 
obnoxious  practice  to  which  that  term  properly  applies  . 

WOULD  ADD  TO  THE  INCENTIVE  FOR  REBAT- 
ING. The  large  degree  of  success  that  has  been  attained 
in  the  enforcement  of  the  laws  against  rebating,  and 
secret  rate  cutting  is  principally  due  to  the  fact  that 
commercial  causes  have  forced  railway  charges  to  so 
low  a  level  that  their  officers  realize  that  the  losses 
incident  to  such  deviations  would  be  destructive  of 
all  profit.  But  if  by  unwise  legislation  the  schedules 
are  forced  to  a  condition  of  rigidity  such  as  would 
necessarily  result  from  their  being  made  and  promul- 

128 


gated  by  a  central  Government  authority,  there  will  be 
much  more  temptation  to  grant  rebates,  and  as  even 
under  present  conditions  the  most  drastic  laws  have  not 
been  sufficient  entirely  to  eliminate  these  evils,  it  is 
reasonable  to  assume  that  under  greater  temptation 
they  would  increase  in  number.  No  law  will  prevent 
shippers  from  offering  traffic  at  less  than  the  legal  rates, 
or  when  concessions  are  refused,  from  withholding  it, 
or  sending  it  forward,  where  possible,  by  carriers 
operating  on  rivers,  canals,  lakes  or  seas,  or  in  adjacent 
foreign  countries.  No  law  will  compel  railway  men  to 
stand  idly  by  while  their  locomotives  rust  in  the  round- 
houses or  their  cars  decay  upon  the  side  tracks  because 
traffic  is  not  offered  at  the  rates  fixed  by  the  Govern- 
ment. If  the  existing  set  of  railway  men  should  decline 
to  violate  such  a  mandate,  and  the  financial  destruction 
of  their  properties  should  ensue,  the  certain  and  inflexi- 
ble operation  of  the  laws  of  business  would  soon  bring 
in  as  their  successors  men  who  would  meet  the  necessi- 
ties of  the  situation.  Again,  the  existence  of  an  author- 
ity under  which  every  public  concession  could  be 
made  a  club  to  compel  involuntary  reductions,  would 
increase  the  tendency  to  meet  the  necessities  of  trade 
by  secret  rate  cutting.  There  would  be  more  rebating 
under  any  system  which  lodged  in  any  public  body 
final  authority  to  fix  rates  for  the  future  than  under 
the  existing  system. 

A  RIGID  SYSTEM.  ''If  you  fix  one  rate  to-day 
and  another  rate  to-morrow,  you  presently  have  fixed 
a  great  many  rates  and  if  those  rates  can  not  be 
departed  from  without  the  consent  of  the  Commission 
or  a  court  that  fixes  the  rates,  you  have  got  in  fact 
a  more  or  less  rigid  system  of  rates." — Testimony  of 
Hon.  C.  A.  Prouty,  Interstate  Commerce  Commissioner, 
Testimony,  Interstate  Commerce  Committee,  U.  S.  Senate, 
Vol.   IV,   p.   2885. 

129 


THE  PHILADELPHIA  BOARD  OF  TRADE.  The 

following  are  extracts  from  a  report  of  the  committee 
on  inland  transportation  which  was  presented,  read, 
and  adopted  at  a  meeting  of  the  Board  of  Trade  of 
Philadelphia,   held  on  May   15,   1905: 

"*  *  *  The  Interstate  Commerce  Legislation 
now  in  force  prohibits  undue  and  unreasonable 
discrimination  in  whatever  way  effected,  whether 
by  agreements  with  particular  customers  or  by 
unreasonable  compensation  for  the  use  of  private 
cars,  or  by  unreasonable  pro  rata  allowances  for 
terminal  railroads,  or  by  any  other  means  whatso- 
ever, for  the  offense  is  in  the  end  and  not  in  the 
means.  No  further  legislation  could  increase  the 
prohibitory  operation  of  the  law.  All  that  is 
needed  is  a  fearless  enforcement  of  existing  law, 
and  for  that  the  Interstate  Commerce  Commission 
has  ample  power,  not  only  under  the  original 
Interstate  Commerce  Act,  but  also  under  the 
Elkins  Act.  *  *  *  American  railroads,  while 
paying  higher  wages  to  labor  and  larger  prices  for 
materials,  nevertheless  charge  lower  rates  for 
carrying  goods  than  those  of  any  other  country. 
This  result  has  been  brought  about  by  reason  of 
the  intelligent  appreciation  by  railroad  managers 
of  the  fact  that  it  is  more  profitable  to  move  a 
large  volume  of  business  at  low  rates  than  a  small 
volume  of  business  at  high  rates.  If  the  power  is 
given  to  the  Commission  to  lower  rates  in  their 
unrestrained  discretion  railroad  managers  will 
hesitate  to  reduce  any  rates,  in  fear  that  the  Com- 
mission may  so  reduce  other  rates  as  to  deprive  the 
railroads  of  all  profits.  *  *  *  The  power  pro- 
posed to  be  vested  in  the  Commission  will  neces- 
sarily lead  to  the  ultimate  adoption  of  a  fixed  rate 
per  mile  per  ton,  which,  when  put  into  practice, 
will  limit  manufacturers  and  merchants  to  the 
markets  of  their  own  localities.'' 

PORT  DIFFERENTIALS  WOULD  BE  ILLEGAL. 

The  Constitution  of  the  United  States  declares  that: 

*'No  preference  shall  be  given  by  any  regulation 
of  commerce  or  revenue  to  the  ports  of  one  State 
over  those  of  another    *    *    *." 

130 


If  the  Interstate  Commerce  Commission  is  given  the 
rate-making  power,  its  exercise  will  be  governed  by  this 
limitation.  The  Constitution  does  not  say  undue  or 
unjust  preference,  as  does  the  Interstate  Commerce 
law;  it  forbids  all  preference.  Any  difference  in  rates 
gives  a  preference  to  the  port  accorded  the  lower  rate, 
but  the  preference  is  not  undue,  unless  it  is  greater 
than  is  justified  by  differences  in  conditions.  The 
Commission,  however,  would  be  obliged  to  forbid  all 
preference,  just  and  unjust  alike,  that  is,  all  differ- 
entials. This  would  destroy  the  competitive  export 
business  of  Philadelphia,  Baltimore,  Newport  News, 
Norfolk,  Charleston,  New  Orleans,  Galveston  and  other 
southern  ports. 

ANY  RATE  AND  ALL  RATES.  "  It  is  useless 
to  urge  that  the  measures  proposed  at  the  present 
time  do  not  include  grantmg  direct  rate-making 
powers  to  the  Commission.  If  the  Commission 
is  to  be  given  power  to  redress  what  is  wrong  in 
rate-making,  it  is  at  least  possible  that  any  rate 
may  soon  be  attacked  and  the  Commission  called 
upon  to  name  the  rate  that  shall  hold." — Profes- 
sor W.  D.  Taylor  J  of  the  University  of  Wisconsin, 
Review  of  Reviews,  August,  1905. 

JUDGE  GOOLET  ON  OFFICIAL  RATE-MAKING. 

''The  Commission  would  in  effect  be  required  to  act 
as  rate-makers  for  all  the  roads  and  compelled  to  adjust 
the  tariffs  so  as  to  meet  the  exigencies  of  business, 
while  at  the  same  time  endeavoring  to  protect  relative 
rights  and  equities  of  rival  carriers  and  rival  localities. 
This  in  any  considerable  state  would  be  an  enormous 
task.  In  a  country  so  large  as  ours  and  with  so  vast 
a  mileage  of  roads  it  would  be  superhuman.  A  con- 
struction of  the  statute  which  would  require  its  per- 
formance would  render  the  due  administration  of  the 
law    altogether    impracticable;    and    that    fact    tends 

131 


strongly  to  show  that  such  a  construction  could  not 
have  been  intended." — Hon.  Thomas  M.  Cooley,  First 
Chairman  of  the  Interstate  Commerce  Commission,  In  re 
Louisville  &  Nashville  Railroad,  1.  Inter.  Com.  Rep.  280. 

TO    ABOLISH     PORT    DIFFERENTIALS.      The 

Atlantic  seaports  south  of  New  York,  viz.:  Philadel- 
phia, Baltimore,  Newport  News,  Norfolk,  Wilmington, 
Charleston,  Savannah,  Brunswick,  Jacksonville,  Pensa- 
cola,  Mobile,  New  Orleans,  and  Galveston  are  all 
competitive  with  New  York  and  Boston  for  import 
trade.  The  southern  ports  named  contend  that,  owing 
to  various  advantages  enjoyed  by  New  York,  their 
business  is  dependent  upon  their  ability  to  secure 
slightly  lower  inland  rates  than  those  to  New  York. 
This  has  long  been  admitted  in  practice  by  the  railways, 
and  the  differences  made  in  their  favor  have  come  to 
be  known  as  differentials.  Some  of  those  who  support 
the  present  effort  to  secure  a  new  law  do  so  because 
they  believe  it  would  result  in  the  prompt  abolition  of 
these  differentials  and  so  enable  Boston  and  New  York 
to  secure  a  much  greater  share  if  not  in  fact  to  monop- 
olize the  export  trade  of  the  country.  In  a  speech  before 
the  Middlesex  Club  of  Boston  (see  the  Boston  Daily 
Globe  of  January  21,  1905),  Senator  Lodge  said: 

''The  movement  is  a  movement  for  the  equaliza- 
tion of  rates.  *  *  *  It  is  a  case  of  the  rebates 
to  individuals  and  of  the  differentials  between 
points.  *  *  *  -^Q  railroad  wants  to  give  a 
rebate  to  anybody.  *  *  *  Wg  have  dealt  some- 
what with  the  question  of  rebates  and  individuals. 
They  are  comparatively  easy  to  deal  with,  but 
when  you  come  to  the  differentials  between  points 
you  touch  communities,  and  that  is  a  very  serious 
matter;  and  to-day  New  York  and  Boston  are 
suffering  from  the  railroad  differentials,  and  are 
made  to  suffer  for  the  benefit  of  points  farther 
south." 

132 


IT  IS  GENERAL  RATE-MAKING.  The  Esch- 
Townsend  relates  solely  to  the  enlargement  of  the 
power  of  the  Government  over  the  rate  schedules 
and  not  to  the  prevention  of  deviations  from  those 
schedules,  which  are  accomplished  by  means  of 
rebates.  The  Commission  has  described  (in  its  Annual 
Report  for  1904)  the  enlarged  power  which  it  seeks, 
as  follows: 

"  What  the  Commission  could  do  if  the  authority 
so  defined  should  be  definitely  conferred  by  the 
Congress  is  this:  After  service  of  complaint  upon 
the  carrier  or  carriers,  after  full  hearing  of  each 
carrier  and  shipper  interested,  and  after  careful 
investigation,  a  report  and  opinion  would  be  ren- 
dered, and  if  the  decision  should  be  against  .the 
carrier  an  order  would  be  entered  directing  it  to 
cease  and  desist  from  charging  the  rate  complained 
of  and  to  substitute  therefor  a  rate  found,  upon  the 
evidence  before  the  Commission,  to  be  reasonable 
and  just." 

The  foregoing  is  chiefly  notable  on  account  of  the 
disengenuous  use  of  the  singular  form  ''rate,"  instead 
of  the  plural  form  ''rates,"  in  describing  the  changes  in 
the  schedules  which  the  Commission  wishes  to  have 
power  to  make.  In  the  case  decided  by  the  Supreme 
Court  in  May,  1897,  the  Commission  had  attempted  by 
a  single  order  to  substitute,  not  "a  rate"  but  several 
thousand  rates,  which  it  regarded  as  "reasonable  and 
just,"  for  several  thousand  other  rates  that  it  had  con- 
demned. The  Commission  regards  it  as  "persistent 
misrepresentation"  to  allege  that  the  power  sought  is 
that  of  rate-making,  but  if  it  is  the  misrepresentation 
began  with  the  highest  court  in  the  land.  In  deciding 
the  case  referred  to  the  Supreme  Court  said: 

"There  is  nothing  in  the  Act  requiring  the  Com- 
mission to  proceed  singly  against  each  railroad 
company  for  each  supposed  or  alleged  violation  of 
the  Act.     In  this  very  case  the  order  of  the  Com- 

133 


mission  was  directed  against  a  score  or  more  of 
companies  and  determined  the  maximum  rates  on 
half  a  dozen  classes  of  freight  from  Cincinnati  and 
Chicago,  respectively,  to  several  named  southern 
points  and  the  territory  contiguous  thereto,  so 
that  if  the  power  exists,  as  is  claimed,  there  would 
be  no  escape  from  the  conclusion  that  it  would  be 
within  the  discretion  of  the  Commission  of  its  own 
motion  to  suggest  that  the  interstate  rates  on  all 
the  roads  of  the  country  were  unjust  and  unreason- 
able, notify  the  several  roads  of  such  opinion, 
direct  a  hearing,  and  upon  such  a  hearing  make 
one  general  order,  reaching  to  every  road  and 
covering  every  rate.     (167  U.  S.  508.)" 

The  Commission  alway  uses  the  word  *^rate,"  but 
in  practice  its  orders  have,  almost  without  exception, 
related  to  a  large  number  of  rates.  In  its  special 
report  to  the  Senate,  dated  May  1,  1905,  the  Com- 
mission said: 

''It  should  be  noted  that  the  number  of  cases  by 
no  means  measures  the  extent  and  variety  of  the 
interests  involved,  since  a  single  case  may  be 
brought  by  a  municipal  or  commercial  organiza- 
tion on  behalf  of  all  shippers  in  an  important 
locality  and  against  an  entire  group  of  carriers 
reaching  numerous  sections  and  distant  points 
of   origin    or   destination." 

RAILWAY     CONDUCTORS     IN     OPPOSITION. 

The  annual  convention  of  the  Order  of  Railway  Con- 
ductors, held  at  Portland,  Oregon,  on  May  13,  1905, 
adopted  the  following  resolutions: 

"Whereas,  the  Congress  of  the  United  States 
will  have  before  it  at  the  coming  session  the  ques- 
tion of  additional  legislation  affecting  the  American 
railways,  employing  1,300,000  people:  Therefore, 
be  it,  by  the  Order  of  Railway  Conductors  in 
biennial  convention  assembled, 

"  Resolved,  that  we  hereby  endorse  the  attitude 
of    President     Roosevelt    in    condemning    secret 

134 


rebates  and  other  illegalities,  and  commend  the 
attitude  of  the  heads  of  the  American  railways, 
who,  with  practical  unanimity,  have  joined  with 
the  President  on  this  question;   and  be  it  further 

"Resolved,  that  we  respectfully  represent  to 
Congress  the  inadvisahility  of  legislation  vesting  %n 
the  hands  of  a  commission  power  over  railway  rates, 
now  lower  by  far  in  the  United  States  than  in  any 
other  country;  that  this  low  cost  of  transportation 
is  the  result  of  the  efficiency  of  American  railway 
management  and  operation,  which  has  built  up  the 
country  through  constant  improvement  in  service 
and  development  of  terrifory,  while  at  the  same 
time  recognition  has  been  given  to  the  value  of 
intelligence  among  employees,  in  contrast  to 
foreign  methods,  where  high  freight  rates  and 
lowest  wages  for  employees  obtain;  that  the 
freight  rates  of  this  country  average  only  2  per 
cent  of  the  cost  of  articles  to  the  consumer;  thus 
making  the  freight  rates  an  insignificant  factor  in 
selling  price,  numerous  standard  articles  being 
sold  at  the  same  price  in  all  parts  of  the  country; 
and  be  it  further 

"  Resolved,  that  the  proposed  legislation  is  not 
in  harmony  with  our  idea  of  the  spirit  of  American 
jurisprudence,  inasmuch  as  it  contemplates  that 
a  single  body  shall  have  the  right  to  investigate, 
indict,  try,  and  condemn,  and  then  enforce  its 
decision  at  the  cost  of  carriers,  pending  appeal, 
which  is  manifestly  inequitable;  and  that  if  there 
is  to  be  legislation  on  this  subject  it  should  be  such 
as  would  secure  and  insure  justice  and  equity,  and 
preserve  equal  rights  for  all  parties  concerned, 
but,  in  view  of  the  facts,  legislation  affecting  rates 
is  not  called  for  at  this  time  and  would  be  inad- 
visable;  and  be  it  further 

"  Resolved,  that  this  convention  finds  itself  in 
accord  with  President  Roosevelt,  who,  in  a 
message  to  Congress  has  said:  'It  must  not  be 
forgotten  that  our  railways  are  the  arteries 
through  which  the  commercial  life-blood  of  this 
nation  flows.  Nothing  could  be  more  foolish  than 
the  enactment  of  legislation  which  would  interfere 
with  the  development  and  operation  of  these 
commercial  agencies.  " 

135 


LOCOMOTIVE  ENGINEERS.  '^The  Congres- 
sional Committee  authorized  to  investigate  railroad 
practices  so  as  to  give  the  Senate  more  information 
when  the  Esch-Townsend  bill,  passed  by  the  House, 
comes  up  at  the  next  session,  probably  in  October, 
began  their  inquiry  on  April  17.  We  believe  the 
Esch-Townsend  bill  will  have  to  be  very  much 
modified  before  it  can  pass  the  Senate;  but  every 
subdivision  of  the  B.  of  L.  E.  in  the  States  should 
take  an  interest  in  this  subject,  which  they  ought 
to  feel  is  very  near  to  them  for  the  interest  of  the 
railroads,  in  a  large  sense,  is  their  interest;  not  that 
it  would  result  in  the  reduction  of  wages,  but 
would,  in  all  probability,  deter  any  advance  and 
would  likely  make  it  more  difficult  to  sustain 
what  we  have,  and  it  would  be  a  good  move  either 
to  see  or  write  each  Congressman  and  Senator, 
and  express  disapproval  of  any  measure  which 
would  take  from  the  railroad  management  the 
rate-making  power.  Let  the  law  be  amended,  if 
necessary,  to  give  the  Commission  power  to  cure 
such  evils  as  are  complained  of,  and  give  it  un- 
qualified authority  to  enforce  the  Interstate 
Commerce  law.  It  is  very  difficult  for  a  layman 
to  see  wherein  the  Government  can  infringe  at 
will  upon  the  liberty  of  contract  of  railroads  in 
the  interest  of  the  shipper,  when  there  can  be  no 
legal  restriction  placed  on  bakeshops  in  the  interest 
of  the  journeyman  baker  or  the  public."  Edi- 
torial in  the  Locomotive  Engineers'  Monthly  Journal, 
May,  1905. 

INTERNATIONAL  RAILWAY  CONGRESS.     The 

International  Railway  Congress  which  convened  in 
Washington,  D.  C,  during  May,  1905,  was  composed  of 
representatives   of  practically  all  the  important   rail- 

136 


way  systems  of  the  world,  including  those  owned  and 
operated  by  Governments  as  well  as  those  under  private 
ownership  and  management.  One  of  the  most  im- 
portant of  the  conclusions  of  the  Congress  related  to 
railroad  rates.  After  prolonged  discussion  of  this 
subject,  the  Congress,  consisting  of  574  delegates  from 
thirty-seven  countries,  unanimously  expressed  its  con- 
clusions as  follows: 

"Tariffs  should  be  based  on  commercial  prin- 
ciples, taking  into  account  the  special  conditions 
which  bear  upon  the  commercial  value  of  the 
services  rendered.  With  the  reservation  that  rates 
shall  be  charged  without  arbitrary  discrimination 
to  all  shippers  alike,  under  like  conditions,  the 
making  of  rates  should,  as  far  as  possible,  have 
all  the  elasticity  necessary  to  permit  the  develop- 
ment of  the  traffic  and  to  produce  the  greatest 
results  to  the  public  and  to  the  railroads  them- 
selves.'' 

These  conclusions  were  ratified  at  the  close  of  the 
session  after  President  Roosevelt's  speeches  had  been 
the  topic  of  discussion  and  two  day's  after  Secretary 
Taft's  address  on  freight  rates  at  the  banquet  of  the 
Congress.  It  was  thoroughly  understood  that  the 
ideal  conditions  pointed  out  in  the  resolution  are  not 
attainable  under  Government  rate-making. 

MANUFACTURERS  PROTEST  AGAINST  RATE- 
FIXING.  B.  T.  Babbitt  Co.,  soap  manufacturers, 
have  very  decided  views  regarding  the  proposed  legisla- 
tion at  Washington  in  the  matter  of  railroad  rates,  and 
have  sent  the  following  communication,  under  date 
July  12,  to  the  chairman  of  the  Interstate  Commerce 
Committee,  United  States  Senate,  and  the  chairman 
of  the  House  Committee  on  Interstate  and  Foreign 
Commerce,  Washington,  D.  C.  This  company  is  now 
constructing  what  will  be  one  of  the  largest  soap  works 
in  the  world  at  Granton,  N.  J.,  which  place  will  in  the 

137 


near  future  be  called  Babbitt,  on  account  of  the  great 
plant  and  the  development  which  will  take  place  in  the 
locality.  This  soap  company  ships  its  product  to  all 
parts  of  the  United  States  and  is  largely  interested  in 
railroad  rate   matters: 

*'We  desire  to  enter  our  protest  against  any  legis- 
lation which  will  give  the  Government  the  right  to  fix 
railroad  rates.  We  are  in  favor  of  the  most  drastic 
legislation  to  prevent  the  railroads  from  giving  secret 
rebates  and  making  discriminations  in  favor  of  one 
shipper  over  another.  All  under  similar  circumstances 
and  conditions  should  be  treated  alike  and  no  one  ship- 
per should  be  favored  above  another.  This  is  so 
essential  to  the  business  interests  of  this  country  that 
laws  should  be  made  on  this  subject  and  worded  so 
clearly  that  there  can  be  no  possible  misunderstanding. 
We  should  know,  now  and  for  all  time,  that  no  one  is 
getting  a  better  rate  than  we  are  under  similar  circum- 
stances  and   conditions. 

"The  giving  of  secret  rebates,  or  doing  for  one  what 
is  not  done  for  all,  should  be  effectively  legislated  against; 
but  we  draw  the  line  at  the  right  of  the  Government 
to   make  the  rates  that  the  railroads  shall  charge. 

*'It  is  true  that  the  railroads  are,  to  a  certain  extent, 
a  semi-public  institution,  and  the  Government  has 
therefore  the  right  to  a  certain  amount  of  control  over 
their  conduct,  and  where  rates  are  excessive  or  unjust 
the  matter  should  go  before  a  court  of  equity  and 
justice  should  decide  the  matter. 

''The  railroads  have  the  right  of  eminent  domain; 
they  can  take  land  to  extend  their  railroad  in  the 
national  interests,  and  where  the  price  of  land  is  ex- 
orbitant the  courts  try  the  matter  and  fix  a  fair  rate; 
but  this  does  not  warrant  the  Government  in  telling 
the  land  owner  at  what  price  he  must  sell  the  remainder 
of  his  land  to  other  individuals. 

138 


''The  railroads  manufacture  a  commodity  called 
'transportation/  which  they  sell  at  the  market  price. 
They  are,  after  all,  private  enterprises  of  a  semi-public 
nature — an  aggregation  of  individuals  who  subscribe 
capital  for  the  construction  of  a  transportation  venture, 
and  they  are  entitled  to  a  fair  return  on  their  invest- 
ment, the  same  as  every  other  business. 

"The  western  and  southern  parts  of  this  country 
are  far  from  being  developed  in  the  matter  of  railroads, 
and  manufacturers  of  all  kinds  look  forward  to  the 
building  of  new  railroads  and  the  consequent  settling 
up  of  territory  now  sparsely  populated,  so  that  new 
markets  can  be  created  for  manufactured  product.  If 
the  Government  be  permitted  to  fix  rates  the  investing 
public  will  be  reluctant  to  put  its  money  into  new 
railroads.  It  requires,  as  stated,  an  aggregation  of 
capital  to  build  a  railroad.  If  the  Government  be 
permitted  to  fix  the  rates  it  would  have  to  state  before- 
hand what  the  rates  on  a  newly-projected  railroad 
would  be,  which  in  nine  out  of  ten  cases  would  be 
practically  impossible.  Government  supervision  or 
regulation  is  all  right,  but  one  can  have  too  much  in- 
terference, with  the  result  that  'cold  water'  is  thrown 
on  private  enterprise.  As  stated,  we  are  in  favor  of 
the  most  drastic  laws  to  prevent  secret  rebates  and  un- 
just discriminations,  but  we  are  emphatic  in  protesting 
against  the  right  of  the  Government  to  make  the  rates. 

"We  have  been  in  business  for  more  than  sixty 
years,  and  feel  that  it  is  our  duty,  as  citizens  and  manu- 
facturers shipping  to  all  parts  of  the  country,  to 
respectfully  ask  that  our  views  be  considered,  as  we  are 
interested  in  the  maintenance  of  correct  principles, 
so  that  this  Government  may  endure  on  solid  lines  ; 
and  private  enterprise,  which  has  made  it  great,  be 

not    discouraged.     "Yours  truly, 

"  B.  T.  BABBITT. 
"By  Clarence  M.  Hyde,  President." 

139 


REAL  POWER  IN  INVERSE  RATIO  TO 
STATUTORY  POWER.  ''The  Massachusetts 
Railroad  Commission  is  perhaps  the  best  known 
example  of  this  kind.  In  the  days  of  its  most 
successful  operation  it  had  practically  no  power 
except  the  power  to  report;  but  its  reports  showed 
such  a  clear  understanding  of  the  points  at  issue 
that  they  were  accepted  as  authority  by  impartial 
men  on  both  sides.  *  *  *  It  is  true,  though  it 
sounds  paradoxical,  that  the  power  of  these  com- 
missions is  lessened  by  increasing  their  powers. 
They  are  engaged  in  building  up  new  laws,  new 
traditions,  and  new  methods  of  business  where 
it  is  absolutely  essential  that  their  reasoning 
should  command  the  assent  of  clear-headed  men 
on  both  sides.  When  they  cease  to  rely  on  their 
reason  and  fall  back  on  authority,  they  lose  the 
educational  power  which  is  the  source  of  their 
dominant  influence." — President  A.  T.  Hadley, 
Economics,  p.  177. 

CONGRESSMAN  STEVENS.:  "Under  the 
operation  of  the  Esch-Townsend  bill,  rates  would 
be  established  very  gradually  over  the  country, 
one  section  being  taken  at  a  time,  and  months,  not 
to  say  years,  would  elapse  before  the  Interstate 
Commerce  Commission  could  fix  rates  covering 
the  country  as  a  whole.  The  rates  thus  estab- 
lished would  be  rigid  and  inelastic,  for  it  would 
require  a  legislative  enactment  to  make  them 
operative  and  another  legislative  enactment  to 
amend  them,  which  would  take  much  time. 
*  *  *  As  an  illustration,  let  it  be  supposed  that 
the  Esch-Townsend  bill  is  the  law  of  the  land,  and 
that  the  legislatures  of  the  Middle  West  States, 
such  as  Minnesota,  Wisconsin,  Iowa,  Kansas,  and 
Nebraska,  enact  legislation  that  is  now  pending 
to  increase  the  rate-making  power  of  railroad 
commissions  within  those  States.  Let  it  be  sup- 
posed, further,  that  the  Interstate  Commerce 
Commission,  *  *  *  -^^g  to  hold  protracted 
hearings  and  fix  a  system  of  rates  for  all  tariffs 
to  the  Gulf  ports.  Much  time  would  elapse 
before  other  sections  of  the  country  could  have 
rates  similarly  established,  and  during  the  inter- 

140 


val  much  harm  might  be  accomplished.  *  *  * 
Suppose,  on  complaint,  the  rates  from  the  Missouri 
river  to  New  Orleans  are  fixed  by  the  Interstate 
Commerce  Commission  under,  say,  the  Esch- 
Townsend  bill,  and  that  the  railroad  commissions 
of  Kansas  and  Nebraska  have  fixed  rates,  the 
latter  from  all  State  points  to  Omaha,  and  the 
former  from  all  State  points  to  Arkansas  City, 
Kansas.  Those  rates  fixed  by  process  of  law, 
could  only  be  changed  by  subsequent  investigation 
and  order  made  in  process  of  law,  and  the  territory 
where  they  are  operative  is  removed  from  the 
domain  of  competition.  Meanwhile,  suppose  that 
the  Interstate  Commerce  Commission  has  not  had 
time,  as  it  would  not  have  had,  to  fix  rates  from 
the  Missouri  river  to  the  Atlantic  coast  either  by 
way  of  Chicago  or  Minneapolis  and  Duluth.  What 
is  the  inevitable  result?  The  rates  to  the  Atlantic 
coast  being  controlled  by  competition,  the  trans- 
portation lines  in  that  direction  monopolize  the 
^rain  trade,  and  the  lines  to  the  Gulf,  having  the 
inelastic  rate  fixed  by  law,  and  not  competition, 
are  unable  to  attract  the  grain  business,  and  both 
they  and  the  country  which  they  traverse  suffer. 
*  *  *  The  period  of  transition  from  the  present 
competitive  system  to  the  system  of  fixed  Federal 
rates  would  be  a  period  of  distress  for  some  parts 
of  the  country  and  increased  prosperity  for  others, 
no  matter  what  form  the  legislation  might  take." 
— Hon.  F.  C.  Stevens,  representative  in  Congress 
from  the  St.  Paul,  Minnesota,  district  in  a  recent 
interview. 

IMPORTANCE  OF  THE  QUESTION.  The  fact 
that  the  Congress  probably  possesses  the  power  of  rate- 
making  for  interstate  railways,  a  power  conferred  only 
by  implication  in  the  days  when  transportation  was 
exclusively  by  wagon  or  by  water,  when  commerce 
among  the  States  was  insignificant  in  volume  and 
attended  by  conditions  wholly  different  from  those 
brought  into  being  by  the,  then  undreamed  of,  loco- 
motive, when  the  greater  portion  of  the  present  area 
of  the  United  States  was  an  uninhabited  and  track- 

141 


less  wilderness,  when  the  entire  population  of  the 
country  was  less  than  four  millions,  when  it  con- 
tained but  five  cities  of  10,000  inhabitants  and  none 
over  35,000;  is  not  proof  that  it  should  be  fully  ex- 
ercised in  the  day  when  even  the  oceans  do  not  mark 
the  boundaries  of  the  nation,  when  the  substantially 
ceaseless  travel  of  45,000  locomotives  over  205,000 
miles  of  track  is  mainly  for  the  movement  of  interstate 
traffic,  when  continental  America  counts  its  population 
as  85,000,000  and  one  of  its  seaports  contains  more 
people  than  were  covered  by  its  flag  when  the  power 
which,  so  barren  then  but  so  potent  now,  was  estab- 
lished. As  said  by  the  Supreme  Court  in  the  Maximum 
Rate  case: 

''The  importance  of  the  question  can  not  be 
overestimated.  BilHons  of  dollars  are  invested 
in  railroad  properties.  Millions  of  passengers,  as 
well  as  millions  of  tons  of  freight,  are  moved  each 
year  by  the  railroad  companies,  and  this  trans- 
portation is  carried  on  by  a  multitude  of  corpora- 
tions working  in  different  parts  of  the  country 
and  subjected  to  varying  and  diverse  conditions. 
(167  U.  S.  494.)" 

A  less  authoritative  contribution  to  the  discussion 
on  this  subject,  says,  with  truth: 

"The  power  to  'revise  rates  and  regulations'  is 
the  power  generally  to  make  rates.  Applied  to 
American  interstate  railway  services,  it  is  greater 
power  than  has  ever  been  exercised  by  any  presi- 
dent or  prince,  by  any  Congress  or  Parliament,  by 
any  body  of  five  men,  or  of  five  thousand  men.  It 
is  jDOwer  to  bind  or  to  loose  industry,  to  enrich  or 
to  impoverish  both  capital  and  labor,  to  build  up 
or  to  tear  down  communities  and  commerce." 

DISTANCE  TARIFFS  WOULD  RESULT.     Nearly 

all  the  applications  for  changes  in  rates  now  received 
by  the  railways  are  supported  either  by  the  claim  that 
similar  freight  is  being  hauled  the  same  distance  for  a 

142 


lower  charge  or  a  greater  distance  for  the  same  charge. 
As  the  railways,  under  the  proposed  law,  which  would 
make  every  proper  concession  a  powerful  weapon  to 
compel  other  and  improper  reductions,  could  not  afford 
to  make  changes,  shippers  would  soon  stop  submitting 
their  representations  of  this  sort  to  the  carriers  and 
would  file  them,  as  complaints,  with  the  Commission. 
And  how  would  they  be  handled?  The  history  of  the 
State  Commissions  shows  that  they  always  make  dis- 
tance the  controlling  factor,  and  it  is  easy  to  perceive 
the  reason  and  to  foresee  that  the  Federal  Commission 
would  do  the  same.  Distance  is  the  one  salient,  uni- 
versal, and  changeless  feature  which  is  always  within 
the  Comprehension  of  a  rate-making  Commission.  The 
official  vision,  often  separated  by  half  a  continent 
from  the  facts,  can  comprehend  a  mile  when  it  can  not 
comprehend  a  mountain.  Such  a  body  always  strug- 
gles ineffectually,  if  at  all,  against  the  principle  of  the 
distance  tariff.  It  may  proclaim,  as  the  Interstate 
Commerce  Commission  has  proclaimed,  the  importance 
of  other  factors;  it  may  protest,  as  the  Commission 
has  protested,  that  distance  does  not  and  ought  not  to 
control,  but  when  the  practical  test  comes  it  will,  nine 
times  cut  of  ten,  as  has  the  Commission  in  an  even 
greater  proportion  of  its  decisions,  accord  paramount 
influence  to  the  distance  factor. 

THERE  WOULD  BE  FEW  VOLUNTARY  REDUC- 
TIONS IN  RATES.  The  history  of  experiments  like 
that  now  proposed  shows  conclusively  that  the  pur- 
chasers of  transportation  invariably  fare  far  better 
with  open-minded  railway  officers  than  they  ever  do 
with  rate-making  Commissions.  No  less  than  30,000 
railway  officers  are  to-day  looking  for  opportunities 
to  make  profitable  reductions  in  rates.  They  conduct 
this  search  not   as   philanthropists,   or  the   agents   of 

143 


philanthropists,  but  because  the  first  lesson  they  have 
learned  as  traffic  officers  and  the  most  thoroughly 
accepted  principle  on  which  they  act  is  that,  under 
certain  conditions,  lower  rates  mean  more  business 
and  an  increase  in  revenue  which  exceeds  the  increased 
cost  that  the  new  business  entails.  They  know  that 
progress  in  this  direction  is  a  geometrical  progression — 
that  is,  that  the  lower  the  rates  the  greater  the  traffic 
and,  within  limits,  the  greater  the  net  revenue;  the 
greater  the  traffic  the  greater  the  number  and  prosper- 
ity of  their  customers;  that  more  prosperous  customers 
mean  new  items  of  traffic  and  enlarged  movement  of 
the  old  items,  and  that  these  augmentations  will  war- 
rant other  reductions  in  charges  which  will  cause  a 
repetition  of  the  process.  Under  normal  conditions, 
and  eliminating  the  items  of  traffic  whose  volume  is 
not  elastic,  there  will  be  no  cessation  in  the  downward 
trend  of  rates,  until  every  consumer  is  satisfied.  But 
create  a  rate-making  Commission  and  everything  is 
changed.  The  traffic  officer  who  formerly  sought  for 
opportunities  to  reduce  his  rates  is  no  longer  open- 
minded;  he  has  been  transformed  into  an  advocate  of 
the  existing  schedule  and  every  item  in  it.  He  knows 
that  a  voluntary  reduction  in  one  direction  will  be 
used  as  a  club  to  compel  an  involuntary  one  in  another. 
He  knows  that  until  driven  to  plead  at  the  bar  of 
justice  that  the  property  of  his  corporation  is  being 
confiscated,  without  due  process  of  law,  its  revenues 
will  have  no  defender  but  himself  and  his  fellow- 
officers.  Therefore  his  answer  to  the  shipper  who 
seeks  a  reduced  rate  is  very  likely  to  be  that  it  is  the 
business  of  the  Interstate  Commerce  Commission  to 
make  reductions.  Thus  substantially  the  whole  burden 
of  adjusting  rates  to  new  conditions  would  be  thrown 
upon  the  Commission.  The  power  of  initiating  changes 
in  rates  not  complained  against  would  be  but  nominal 

144 


and  so  limited  as  to  make  its  exercise  too  dangerous 
to  be  permitted.  So  it  has  proved  in  other  countries 
and  so  it  would  be  in  this.  And  no  Commission  of  five 
men  or  of  fifty  men  can  order  reductions,  after  investi- 
gations bearing  the  slightest  resemblance  to  judicial 
procedure,  with  one-tenth  of  the  rapidity  with  which 
they  are  now  voluntarily  made. 

INCREASES    IN   RATES   WOULD    RESULT.    If 

only  the  difference  between  one  rate  and  another  is  in 
controversy,  it  can  be  just  as  effectively  modified  by 
raising  one  of  them  as  by  lowering  the  other.  No  one 
contends,  for  example,  that  a  rate  of  20  cents  per  100 
pounds  on  grain  shipped  from  Chicago  to  New  York  is 
unreasonable,  but  it  was  recently  contended  by  New 
York  interests  that  a  difference  of  3  cents  in  favor  of 
Baltimore  was  excessive.  If  the  Commission,  having 
obtained  the  power  now  sought,  should  sustain  such  a 
contention  and  order  the  carriers  to  cease  and  desist 
from  enforcing  a  differential  of  more  than  1  cent,  its 
order  could  be  obeyed  by  reducing  the  New  York  rate 
from  20  to  18  cents  or  by  raising  the  Baltimore  rate 
from  17  to  19.  If  the  companies  interested  chose  the 
latter  method,  what  agency  could  compel  them  instead 
to  lower  the  just  and  reasonable  rate  to  New  York? 
Indeed,  in  such  a  contest,  where  the  higher  rate  is 
reasonable,  it  is  obvious  that  the  only  remedy  which 
would  be  sustained  on  appeal  to  the  courts,  would 
be  an  advance  of  the  lower  rate.  The  Commission 
has,  in  its  reports,  indicated  many  cases  in  which  it 
would  have  exercised  this  power  to  prescribe  minimum 
rates.  In  one  case  (Annual  Report  for  1897,  pp.  24-25) 
the  power  would  have  been  used  to  require  an  advance, 
or  perhaps  to  prevent  a  reduction,  in  the  rates  on  lum- 
ber from  AVinona,  Minnesota,  to  Kansas  City,  Omaha, 
and  contiguous  territory.  Again,  in  1898,  the  Com- 
mission   enumerated    (Annual    Report    for    1898,    pp. 

145 


23-24)  three  cases  of  great  importance  which  it  thought 
served  as  illustrations  of  its  contention  that  the  fact 
that  it  can  not  prescribe  minimum  rates  constitutes 
^'a  serious  defect  in  the  statute.'' 

A  FLOOD  OF  LITIGATION  WOULD  FOLLOW. 

The  present  Interstate  Commerce  law  has  probably 
received  about  all  of  the  judicial  interpretation  which 
it  requires.  Neither  the  Commission  nor  the  litigants 
before  it  need  hereafter  go  far  astray  as  to  the  authority 
which  it  confers  or  the  remedies  which  it  affords. 
Eighteen  years  have  barely  sufficed  to  bring  about 
this  fortunate  situation.  It  would  be  a  great  pity 
if  on  the  hour  of  this  attainment  it  should,  without 
sufficient  reason,  give  place  to  a  new  law  which  would 
require  a  second  period  of  judicial  interpretation.  Yet 
it  is  beyond  the  utmost  power  of  statesman  or  lawyer  to 
devise  a  statute  on  so  complex  and  important  a  subject 
as  this,  a  statute  proposing  to  modify  and  control  all  of 
the  contractual  relations  between  interstate  railways 
and  their  patrons,  which  will  not  require  extended  and 
elaborate  interpretation  through  a  term  of  years  before 
it  is  fully  and  clearly  established.  It  should  not  be 
forgotten  that  there  are  two  clauses  of  the  Federal  Con- 
stitution under  which  ^very  rate  prescribed  by  legis- 
lative authority  can  be  brought  before  the  Federal 
Courts.     These    are: 

(a)  *'No  person  shall  be  *  *  *  deprived  of 
life,  liberty  or  property  without  due  process  of 
law,"  and 

(b)  "No  preference  shall  be  given  by  any 
regulation  of  commerce  or  revenue  to  the  ports  of 
one  State  over  those  of  another." 

ONE  EFFECT  OF  RAILWAY  DEPRESSION.    The 

following  table  shows  the  reduction  in  the  numbers  of 
the  various  classes  of  railway  employees  made  neces- 
sary by  the  depression  of  the  railway  business  during 

146 


the  fiscal  year  1894.  For  the  sake  of  completeness  the 
numbers  of  men  employed  in  each  class  in  1903  are  also 
shown: 


General  officers 

Other  officers 

General  office  clerks 

Station  agents 

Other  station  men 

Enginemen 

Firemen 

Conductors 

Other  trainmen 

Machinists 

Carpenters 

Other  shopmen 

Section  foremen 

Other  trackmen 

Switchmen,  flagmen,  etc 

Operators  and  despatchers  . .  , 
Floating  equipment,  employees 
All  other  employees  &  laborers. 
Unclassified 

Total 


NUMBER  OP  EMPLOYEES 

ON  JUNE  30 

1893 

1894 

1903 

6.610 

5,257 

4,842 

1,778 

5,201 

27,584 

24,779 

42,218 

28,019 

28,199 

34,892 

75,181 

71,150 

120,724 

38,781 

35.466 

52,993 

40,359 

36,327 

56,041 

27,537 

24,823 

39,741 

72,959 

63,417 

104,885 

30,869 

29.245 

44,819 

41,878 

36,328 

56,407 

93,709 

[  84,359 

154,635 

29,699 

29,660 

37,101 

180,154 

150,711 

300,714 

46,048 

43.219 

49,961 

22,619 

22,146 

30,984 

►  6,146 

7,469 

7,949 

105,166 

85,276 

168.430 

284 

873.602 

779,608 

1.312.537 

MISCHIEF  WILL  FOLLOW.  '  It  is  doubtful 
if  many  of  those  who  are  calling  for  radical  govern- 
mental control  over  transportation  charges  have 
stopped  to  inquire  what  has  been  the  chief  agency 
in  making  it  possible  to  relate  this  wonderful  tale 
of  prosperity  and  progress,  *  *  *  there  can  be 
no  doubt  but  that,  on  the  whole  the  freight  rates 
of  the  country  have  been  adjusted  in  the  past  in 
very  nearly  the  best  way  possible  for  the  upbuild- 
ing of  the  country^s  commerce.  *  *  *  Yot 
many  a  year  to  come  there  is  little  doubt  that  the 
interest  of  the  whole  country  can  best  be  served 
if  the  practice  of  the  railways  is  not  interfered  with 
of  introducing  experimental  rates  which  are 
abolished  when  found  ill-advised  or  unprofitable." 
— Professor  W.  D.  Taylor ,  of  the  University  of  Wis- 
consin, Review  of  Reviews,  August,  1905. 

147 


A  LESSON  FROM  EXPERIENCE.  Pleading  in 
its  usual  vein  for  additional  authority,  the  Interstate 
Commerce  Commission,  in  its  eighteenth  annual  (1904) 
report  said: 

''In  the  fixing  of  rates  upon  all  commodities 
for  carriage  in  all  directions  and  between  all  points 
reached  by  railroads  it  is  inevitable  that  much 
injustice,  unfairness,  unreasonableness,  prefer- 
ence and  discrimination  will  be  practiced,  notwith- 
standing the  greatest  care  and  ripest  judgment 
may  be  exercised  by  the  railway  officials  charged 
with  the  duty  of  rate-making.  These  errors  of 
judgment  on  the  part  of  railway  oflacials,  many 
of  them  occurring  in  the  hasty  exercise  of  the  rate- 
making  function  or  in  the  effort  to  press  on  to  the 
discharge  of  other  urgent  duties,  constitute  the 
reason  for  Federal  regulation  and  the  basis  of  the 
present  widespread  demand  for  an  amendment 
to  the  existing  statute  which  will  enable  their 
speedy  correction  when  the  results  of  these  errors 
are  felt  by  the  commercial  public.'' 

It  is  worth  while  to  contrast  with  the  foregoing 
glowing  summary  of  the  Commission's  hopes  a  part  of 
the  published  statement  of  one  of  the  litigants  recently 
before  it.  The  Boston  Chamber  of  Commerce  has  just 
published,  in  pamphlet  form,  a  criticism  of  the  action 
of  the  Commission,  in  regard  to  port  differentials,  from 
which  the  following  extracts  have  been  taken: 

"The  report  and  opinion  of  the  Commission 
defies  analysis.  It  openly  confesses  a  vain  search 
for  some  fundamental  principle  upon  which  to 
settle  the  dispute.  Failing  in  this  it  flounders 
around  in  an  abortive  attempt  to  justify  the  in- 
defensible. It  undertakes  to  'rob  Peter  to  pay 
Paul'  and  to  accomplish  the  impossible  feat  of 
pleasing  everybody  without  offending  anyone. 
It  enunciates  as  facts  statements  contradicted  by 
the  evidence  submitted.  It  strives  to  create  an 
artificial  division  of  the  export  traffic  between 
the  different  ports  by  strangling  competition 
through  a  so-called  'equalization  of  advantages.' 

148 


*  *    *    Was  ever  'Confusion  worse   confounded?' 

*  *  *  In  this  remarkable  decision,  the  Com- 
mission, after  stating  that  the  purpose  of  the 
original  differential  agreement  of  1877  was  to 
create  equal  through  rates,  finally  decides  that, 
subject  to  slight  modification,  the  differentials 
provided  for  in  that  agreement  should  now  sub- 
stantially be  retained  for  the  astonishing  purpose 
of  creating  unequal  through  rates.  Lastly,  the 
Commission  has,  to  the  extent  of  its  ability,  com- 
pelled the  New  York  and  Boston  railroad  lines 
to  charge  higher  rates  than  they  are  ready  and 
willing  to  accept." 

REGENT  EVIDENCE  ON  GOVERNMENT  ENTER- 
PRISE. "If  Government  ownership  of  railways,  its 
next-door  neighbor.  Government  rate-making,  or  any 
other  of  the  various  proposals  for  an  extension  of  Fed- 
eral enterprise  in  the  industrial  world  comes  before 
Congress  in  an  urgent  form  next  winter,  it  ought  to 
encounter  several  fresh  obstacles.  The  current  year 
has  been  particularly  prolific  in  incidents  which  place 
Government  enterprise  of  whatever  sort  in  a  most  un- 
enviable light,  so  far  at  least  as  relates  to  our  own 
country.  It  will  be  no  more  than  just  that  those  who 
advocate  any  addition  to  State  functions  should  explain 
the  difficulties  in  performing  those  or  similar  functions 
under  our  administrative  system.  Advocates  of  the 
schemes  proposed  must  show  a  clean  record  in  these 
matters  before  they  can  expect  to  have  their  proposals 
for  new  extensions  taken  seriously. 

Unfortunate  as  the  situation  may  seem,  wounding 
to  our  national  pride  as  the  fact  itself  may  be,  it  is  true 
that  recent  developments  leave  hardly  a  single  element 
of  Government  industrial  enterprise  without  its  taint. 
In  the  crop  report  service  it  has  been  seen  how  great  is 
the  danger  that  men  entrusted  with  no  elaborate 
process  of  manufacture,  with  no  extensive  system  of 
buying  supplies,  but  simply  concerned  with  the  task 

149 


of  collecting  and  honestly  safeguarding  valuable  in- 
formation, could  be  wrought  upon  by  the  desire  for 
gain  in  such  a  way  as  absolutely  to  prostitute  their 
work  to  private  profit  and  to  inflict  serious  damage 
upon  a  section  of  the  community  in  order  to  serve 
their  own  ends.  The  same  moral  is  pointed  by  the 
conditions  in  various  other  bureaus  where  it  now  ap- 
pears that  even  men  scientifically  educated,  selected 
under  stringent  tests  of  fitness  and  entrusted  primarily 
with  investigative  work  have  been  unable  to  resist  the 
temptation  to  make  money  through  the  sale  of  the 
discoveries  or  information  obtained  in  the  Government 
service  and  at  Government  expense.  No  matter 
whether  they  have  actually  used  the  information 
placed  in  their  hands  in  a  gainful  way,  or  have  merely 
employed  it  as  a  means  of  favoring  certain  private  in- 
dividuals to  the  detriment  of  others,  the  point  is  the 
same — Government  servants  of  the  highest  order 
have  been  unable  to  stand  the  test  of  responsibility 
for  information  that  had  a  commercial  value.  In 
other  bureaus  and  departments  where  Government 
officers  were  entrusted  with  the  actual  making  of  con- 
tracts for  supplies,  or  with  large  expenditures  of  money, 
the  situation  has  been  even  more  disastrous.  This  is 
shown  not  merely  by  the  current  inquiries  in  Washing- 
ton, which  throw  some  light  upon  that  phase  of  the 
situation,  but  is  abundantly  proved  by  investigations 
not  too  far  in  the  past,  which  have  demonstrated  be- 
yond a  peradventure  the  unfitness,  not  of  one,  but  of 
considerable  numbers  of  officials,  to  sustain  the  public 
trust  with  which  they  were  charged. 

But  it  is  not  merely  these  familiar  instances  of  un- 
satisfactory official  conduct  from  which  inferences  may 
be  drawn  concerning  the  fitness  of  our  Government  as 
an  industrial  agency.  More  important  than  any  of 
of  them,  it  should  be  noted,  is  the  fact  that  they  were 

150 


committed  without  the  knowledge  of  the  man  at  the 
head.  Secretary  Wilson  had  no  idea  of  the  conditions 
that  prevailed  in  various  bureaus  in  his  own  depart- 
ment. The  late  Secretary  Payne  asserted  and  re- 
asserted his  utter  ignorance  of  the  terrible  conditions 
in  the  Post  Office.  No  one  supposes  for  a  minute  that 
Secretary  Hitchcock  had  the  remotest  conception  of 
the  land  frauds  that  were  being  perpetrated  in  the 
Department  of  the  Interior.  They  were  undoubtedly 
in  progress  for  many  years  before  they  were  even 
suspected  by  him.  Disastrous  experience,  too,  has 
shown  the  inefficiency  of  Government  officials  as  in- 
spectors of  financial  and  other  institutions.  As  bank 
examiners,  life  insurance  superintendents,  steamboat 
inspectors,  and  in  other  like  responsible  positions, 
their  inattention  or  inefficiency  has  been  emphasized 
in  the  most  lamentable  way  by  recent  examples.  The 
evil  is  as  bad  among  Federal  employees  as  among 
State  ofl&cers.  It  would  be  very  difficult  to  name  an 
instance  in  which  the  Government  has  touched  indus- 
trial enterprise  with  success. 

And,  to  accomplish  even  the  results  that  have  been 
actually  obtained,  how  large  a  force,  how  extravagant 
an  outlay  has  been  required.  The  mounting  figures 
of  the  Treasury  deficit,  the  inability  to  curtail  appro- 
priations, the  appointment  of  a  Commission  for  the 
special  purpose  of  ascertaining  how  to  do  away  with 
some  of  the  manifestly  cumbersome  and  useless  ma- 
chinery designed  to  avoid  dishonesty  and  fraud,  bear 
eloquent  testimony  to  the  difficulty  of  administering 
any  public  enterprise  with  the  methods  employed  by 
our  Government.  Nor  is  there  much  prospect  of 
improvement.  The  Government  is  apparently  the 
only  organization  that  cannot  learn  by  experience. 
Things  are  no  better  now  in  the  Federal  service  than 
they    have    been    in   the   past.     Experience    has   not 

151 


taught  a  single  lesson.  Practice  instead  of  reducing 
the  number  of  routine  operations  required  in  perform- 
ing a  given  function,  has  increased  them.  The  demand 
for  higher  salaries  for  Government  employees,  notwith- 
standing that  the  pay  received  by  these  employees  is 
higher  than  they  could  get  in  other  occupations,  and 
the  shameless  argument  that  they  may  be  inefficient 
because  poorly  paid,  and  must  be  excused  for  dis- 
honesty for  the  same  reason,  is  sufficient  indication  of 
the  probable  future  of  the  Government  service. 

It  is  no  reply  to  argument  based  on  these  conditions 
to  say  that  recent  revelations  in  private  companies 
have  indicated  as  bad  a  state  of  affairs,  if  not  worse. 
The  truth  is  that  it  is  precisely  those  enterprises  that 
approximate  most  nearly  to  governmental  method  in 
their  administration  that  stand  convicted  of  irregular 
practices.  Freedom  from  competition,  routine  meth- 
ods in  business,  favoritism  whether  of  the  family  or 
political  type,  absence  of  democratic  control  by  those 
who  are  concerned,  will  produce  the  same  results 
whether  under  Government  or  private  auspices.  The 
argument  against  an  extension  of  Government  enter- 
prise is  that  such  evils  assume  a  more  virulent  form 
in  that  field  of  endeavor,  and  that  the  usual  checks 
are  there  absent.  Of  this  the  recent  revelations  afford 
as  striking  an  instance  as  we  have  had  for  a  long  time 
past." — Editorial,  New  York  Journal  of  Commerce, 
August  3,  1905. 


152 


RAILWAYS  IN  FOREIGN  COUNTRIES 


MEMORANDUM     FOR     THE     COMMITTEE     ON 
INTERSTATE    COMMERCE    OF    THE 
UNITED  STATES  SENATE. 

On  pages  3600-3601  of  Volume  IV  of  the  hearings 
before  the  Committee  on  Interstate  Commerce,  pur- 
suant to  Senate  Resolution  No.  288,  it  appears  that 
while  I  was  before  the  Committee  Senator  Foraker 
addressed  me  as  follows: 

''If  you  have  opportunity,  before  you  put  these 
other  matters  in  evidence  that  you  intend  to  look 
up  and  supply,  I  wish  you  would  look,  and  give  us 
the  result  of  your  investigations  in  a  general  way, 
not  going  into  detail,  as  to  the  effect  on  the 
decline  in  rates  of  governmental  interference  with 
the  fixing  of  rates  in  any  other  countries." 

In  accordance  with  the  foregoing,  I  have  made  a  study 
of  railway  conditions  in  the  United  Kingdom,  Prussia, 
France,  Italy,  Austria  and  Russia,  from  such  sources  as 
were  available  to  me,  and  the  results  are  herewith  sub- 
mitted. 

United  Kingdom. — European  railroad  policy,  out- 
side of  the  United  Kingdom,  is  dominated  by  the  spirit 
of  nationality,  whether  the  roads  are  privately  owned, 
as  in  France,  or  under  State  ownership,  as  in  Germany. 
In  the  United  Kingdom,  however,  as  in  the  United 
States,  railway  development  was  left  to  private  initiative 
and  governmental  control  has  attempted  the  prevention 
and  correction  of  abuses,  not  the  strengthening  of 
political   power.      In   consequence,   the   experience   of 

153 


England  in  railroad  regulation  is  of  far  greater  im- 
portance in  the  study  of  American  problems  than  the 
experience  of  continental  countries. 

In  the  earliest  English  charters  maximum  rates  of 
charge  were  fixed  just  as  maximum  tolls  were  in  force 
for    canal    traffic.         *         *  *         'pj^g  importance 

of  the  maximum  rates  fixed  in  the  charters,  for  ordinary 
transportation,  was  very  slight  for  two  reasons:  (1)  The 
actual  charges  in  general  were  soon  forced  by  business 
considerations  far  lower  than  was  anticipated.  Expe- 
rience soon  proved  that  much  larger  profit  was  to  be 
obtained  by  hauling  large  quantities  of  goods  at  low 
rates  than  small  quantities  at  high  rates.  (2)  Even  in 
the  case  of  articles  on  which  relatively  high  rates  were 
charged,  it  was  extremely  difficult  to  ascertain  pre- 
cisely what  the  legal  rates  amounted  to.  The  rates 
used  by  the  roads  included  terminal  expenses  and 
charges  for  collection  and  delivery.  *  *  * 
The  conclusion  of  Professor  (now  President)  Hadley,  in 
his  Railroad  Transportation  (p.  178),  that  ''fixed 
maxima  are  of  next  to  no  importance  in  preventing 
extortion"  is  amply  proved  by  English  experience. 

From  the  courts  the  question  was  finally  carried  to 
Parliament,  which  in  1888  determined  that  the  maxi- 
mum freight  rates  should  be  thoroughly  revised.  The 
work  of  revision  was  entrusted  to  the  Board  of  Trade, 
which  after  conducting  an  exhaustive  inquiry  during 
1889   and   1890  submitted  its  results  to   Parliament. 

*:|C9iC3iC*9icH(* 

The  new  schedules,  which  were  to  go  into  effect  on 
January  1,  1893,  were  not  finally  published  in  some 
cases  until  a  few  months  before  the  date  set.  The  short 
time  given  was  entirely  inadequate  for  a  thorough 
revision  of  the  actual  rate  sheets.  Many  railroad 
managers  also  felt  justified  in  increasing  some  of  the 
rates  that  were  lower  than  the  new  maxima  in  order  to 

154 


compensate  for  the  reductions  which,  in  other  instances, 
were  required  by  them.  *  *  *  Although  the  rail- 
roads had  the  legal  right  to  make  any  charges  they 
desired  so  long  as  they  did  not  exceed  the  legal  maxima, 
their  action  caused  great  popular  complaint  and  Parlia- 
ment speedily  passed  the  more  stringent  Railway  and 
Canal  Traffic  Act  of  1894.  This  statute  provides  that 
any  shipper  may  appeal  to  the  Railway  Commission  to 
annul  any  increased  rate  made  on  or  after  January  1, 
1893,  and  that  this  shall  be  done  unless  the  company 
justifies  the  increase  to  the  satisfaction  of  the  Com- 
mission. Thus  not  only  are  fixed  maximum  rates 
imposed  by  Parliament,  but  the  railroads  have  no 
longer  the  power  to  raise  any  rate  whatever  except  with 
judicial  approval. 

Has  the  stringent  legislation  in  force  since  1893  led  to 
reduced  rates?  Mr.  W.  M.  Acworth,  probably  the 
leading  English  writer  and  lecturer  on  railroad  ques- 
tions, from  whose  recent  book  the  foregoing  account 
has  been  largely  taken,  reaches  the  following  con- 
clusion: * 

The  legislation  of  the  years  from  1891  to  1894 
has  done  much  to  prevent  any  natural  and  gradual 
lowering  of  rates.  A  railway  company  is  still  free 
to  lower.  It  has  ceased  to  be  free  to  raise.  A 
manager  may  desire  to  lower  a  rate,  hoping  thereby 
not  only  to  benefit  trade,  but  also,  by  increasing 
largely  the  volume  of  traffic,  to  increase  his  own 
net  earnings.  But  it  is  only  a  hope.  In  the  nature 
of  the  case  certainty  is  not  attainable  in  advance. 
A  prudent  manager,  therefore,  will  not,  unless  his 
hope  is  closely  allied  to  certainty,  lower  a  rate 
when  he  must  face  a  lawsuit  before  he  can  put  it  up 
again.  Still  less  will  a  conference  of  managers — 
and  most  important  rates  affect  many  companies-f- 
allow one  of  their  number,  more  sanguine,  or,  it 
may  be,  more  far-sighted  than  the  rest,  to  go 
ahead  and  make  experiments.  This,  at  least,  is 
what  we  might  expect  a  priori. 

*  The  Elements  of  Railway  Economics,  p.  168. 
155 


The  truth  of  the  a  priori  conclusion  of  Acworth,  that 
the  difficulty  of  raising  rates  has  prevented  the  national 
decline  in  rates,  is  clearly  shown  by  official  statistics. 
In  the  ten  years  preceding  governmental  regulation  the 
average  freight  rates  per  ton  decreased  143^  per  cent; 
in  the  decade  following  the  decrease  was  less  than  2}/^ 
per  cent.  The  statistics  in  the  Official  Railway  Returns, 
from  which  this  striking  comparison  is  taken,  are  as 
follows: 


Average 


Freight 
long  tons 


Freight 
charges 
(pounds 
sterling) 


Rate 

Rate 

per  long 

per 

ton 

short 

(shil- 

ton 

lings) 

(cents) 

3.03 

65.8 

2.60 

56.5 

2.54 

55.2 

Decline 
per 
cent 


187^1882  I  237,174.806 
1888-1892  320,465,070 
1898-1902  j   413,936,580 


35,981,977 
41,631,942 
52,488,131 


14.6 
2.3 


Unfortunately,  the  British  railroad  statistics  do  not 
show  the  distance  over  which  the  freight  is  carried,  so 
that  it  is  impossible  to  compare  the  rates  per  ton  per 
mile  during  the  different  periods.  This  omission  in  the 
British  statistics  makes  international  comparisons  of 
the  amount  of  rates  unsatisfactory;  it  is  extremely 
unlikely,  however,  that  there  has  been  sufficient  change 
in  the  length  of  the  average  haul  or  in  the  character  of 
traffic  to  prevent  the  comparison  just  made  from 
expressing  in  a  general  way  the  variation  in  rates 
within  the  country. 

The  more  rapid  and  less  interrupted  decline  in 
average  freight  rates  in  the  United  States,  as  compared 
with  the  arrested  decline  in  the  United  Kingdom  after 
the  institution  of  governmental  control,  is  shown 
below: 

DECLINE  (per  cent) 


AVERAGE 


UNITED   KINGDOM      UNITED  STATES 


1879-1882  to  1888-1892 
1888-1892  to  1898-1902 


14.5 
2.3 


21.3 
19.2 


156 


The  demoralizing  effect  on  trade  of  the  radical 
legislative  changes  of  1888-1894  has  been  pointed  out. 
Yet  there  were  certain  features  peculiar  to  the  British 
railroad  situation  that  made  the  change  much  less 
injurious  and  the  effect  of  extreme  regulation  less 
productive  of  evil  than  would  have  been  the  case  had 
such  restrictions  been  imposed  in  the  United  States. 
The  work  of  the  Railway  Clearing  House,  instituted  in 
1850,  together  with  the  combination  of  the  roads  into  a 
few  companies,  had  so  unified  railroad  practice,  classifi- 
cation and  interests,  that  while  the  task  was  enormous 
it  was  not  impossible  for  the  Board  of  Trade  to  con- 
struct a  workable  series  of  maximum  charges.  Yet 
some  of  the  charges  were  anomalous.  One  such  case  is 
cited  by  Acworth  (p.  146).  Two  small  roads  were 
granted  a  special  maximum  of  three  pence  per  ton  per 
mile  on  minerals,  although  the  maximum  on  coffee  and 
confectionery  was  only  2.65  pence.  It  appeared  from 
statements  submitted  both  by  the  managers  and  ship- 
pers that  these  roads  were  already  in  the  hands  of  a 
receiver,  the  income  not  being  sufficient  to  pay  interest 
on  their  bonds,  and  that  a  lower  rate  on  granite,  which 
comprised  the  bulk  of  the  traffic,  would  prevent  their 
continued  operation. 

It  has  been  shown  that  the  decline  in  freight  rates 
was  arrested  after  the  change  in  law.  In  a  newer 
country,  the  decreased  effort  to  build  up  new  lines  of 
traffic  by  tentative  low  rates  could  scarcely  have  failed 
to  bring  about  disastrous  results.  With  the  fear  of 
making  open  reductions  in  rates  there  would  also  have 
been  a  strong  temptation  to  cut  rates  secretly  if  there 
had  been  active  competition  between  the  roads. 
******** 


167 


On  the  Continent. — Professor  Hadleyf  was  un- 
doubtedly correct  when  he  attributed  the  growth  of 
business  activity  on  the  part  of  Governments  to  three 
motives: 

"1.  To  increase  their  own  political  influence. 

"2.  To  make  up  for  lack  of  private  enterprise. 

"3.  To  avoid  abuses  incident  to  private  manage- 
ment." 

"The  last  consideration,  which  is  the  main  point 
in  the  United  States  to-day,  has  played  but  a  sub- 
ordinate part  elsewhere.  The  desire  to  extend 
political  influence — military,  civil  or  financial — 
has  usually  been  the  chief  motive.'' 

Without  fully  appreciating  this  fact  it  is  impossible  to 
read  correctly  the  railroad  history  of  Europe.  In 
England,  where  private  enterprise  was  not  lacking  and 
where  nationality  was  secured  before  the  era  of  rail- 
roads, State  ownership  has  never  received  serious 
consideration.  France  likewise  was  a  nation  before 
railroads  were  introduced,  but  the  inability  to  interest 
private  capital  necessitated  governmental  subsidies 
coupled  with  rigorous  control.  German  and  Italian 
statesmen,  on  the  other  hand,  welcomed  the  State  rail- 
road as  an  iron  bond  to  safeguard  national  unity.  In 
general,  while  economic  considerations  have  been 
brought  forward,  the  political  danger  of  strong  private 
companies  and  the  military  advantage  of  governmental 
control  have  been  the  chief  incentives  to  State  owner- 
ship. 

The  mileage  of  State  and  private  railroads  in  the 
various  European  countries  in  1902  is  shown  in  the 
following  table  compiled  from  official  statistics  of  the 
various  countries,  supplemented  by  the  British  Statisti- 
cal Abstract. 

t  Railroad  Transportation,  p.  238. 

158 


Germany 

Russia,   European   (exclusive 

of  Finland) 

France 

United  Kingdom 

Austria 

Hungary 

Italy  (1901) 

Spain  (1900) 

Sweden 

Belgium 

Switzerland 

Roumania 

Denmark 

Netherlands 

Portugal  (1901) 

Norway 

Bulgaria  (1901) 

Greece 

Servia 


Total  (of  countries  named) .    176,853 


32,288 

30,224 

27,874 

22,162 

12.409 

10.820 

9.888 

8,206 

7,421 

2.845 

2.468 

1,969 

1,879 

1,771 

1.348 

1,307 

921 

694 

369 


PRIVATE 
OPERATION 


2.815 

11.665 

26,148 

22,152 

5,004 

1,848 

a9.888 

8,206 

5,005 

330 

&2,468 

767 
800 
823 
140 
192 
694 
14 


98.959 


STATE 
OPERATION 


29,473 

18,559 
1,726 


7,405 
8,972 


2,416 
2,515 

i',969 

1,112 

971 

525 

1,167 

729 

355 


77,894 


a  Owned  by  State,  but  leased  to  private  companies. 
b  In  1898  it  was  decided  to  purchase  the  entire  system  partly  in 
1903  and  partly  in  1909. 

France. — France  was  much  behind  other  powers  in 
obtaining  railroads.  Unwilling  to  have  railroads  built 
without  a  comprehensive  plan,  the  construction  of 
lines  was  not  permitted  until  the  details  of  a  complete 
system  for  the  country  were  worked  out.  The  unwill- 
ingness of  capital  to  undertake  the  building  of  lines 
which  were  laid  out  with  regard  to  other  than  purely 
business  purposes  and  moreover  were  to  be  subject  to 
rigorous  governmental  supervision,  led  to  an  unique 
compromise  between  public  and  private  ownership. 
Somewhat  more  than  half  the  total  cost  was  contrib- 
uted by  the  Government,  which  retained  ownership  of 
the  roadbed,  while  the  remainder  necessary  for  track 
equipment,  etc.,  was  required  from  the  companies 
undertaking   the    construction    and    operation    of   the 

159 


lines.  After  a  fixed  period — at  first  forty  years,  but 
later,  in  the  fifties,  extended  for  ninety-nine  years 
from  the  date  of  the  extension — the  whole  system  is  to 
revert  to  the  National  Government.  The  systematic 
location  of  the  lines  prevented  parallel  lines,  limited 
competition,  and  facilitated  combination.  The  ''great 
companies,''  six  in  number,  each  supreme  within  its 
own  territory,  now  control  all  the  important  railroad 
transportation  of  the  country.  About  1877  the  Gov- 
ernment acquired  one  small  system  in  the  southwest. 
For  some  years  afterward  there  was  a  strong  move- 
ment in  favor  of  Government  ownership  by  purchase 
and  new  construction,  but  the  movement  soon  col- 
lapsed. There  has  been  a  lack  of  incentive  to  the 
building  of  new  lines,  which  was  overcome  partially  by 
additional  State  aid  in  the  form  of  a  guarantee  of  bonds 
in  1859  and  a  guarantee  of  dividends  in  1883.  Even 
now  France  contains  only  134  miles  of  line  per  1,000 
square  miles  of  territory  against  an  average  of  155 
miles  in  Germany. 

The  control  over  rates  on  private  lines  in  France  is 
probably  quite  as  rigorous  as  over  State  lines  in  Ger- 
many. Indeed  it  is  doubtful  whether  there  is  as  great 
elasticity  in  France  as  in  Germany.*  Every  change  in 
rates  must  receive  the  approval  of  the  ministry  before 
it  goes  into  effect.  This  approval,  known  as  ''homolo- 
gation," is  a  very  complicated  matter.     As  described 

*  Professor  Hadley,  in  his  Railroad  Transportation,  pp.  200-201, 
says:  "It  is  an  interesting  fact  that  a  railroad  which  is  owned 
and  managed  bv  a  State,  in  its  general  policy  is  much  more  like 
our  own  railroads  than  is  a  road  which  is  owned  by  a  private  com- 
pany, but  strictly  controlled  by  State  regulations.  In  the  latter 
case,  the  State  has  no  direct  interest  in  making  exceptions  to  its 
own  rules.  In  the  former  case  it  has.  *  *  *  This  difference  is 
strikingly  seen  in  comparing  the  development  of  railroads  in  Bel- 
gium or  Germany,  where  the  State  actually  owned  the  leading 
roads,  with  that  in  France,  where  it  merely  controlled  them.  The 
former  was  much   more  untrammeled." 

160 


in  Guyot  and  Raffalovitch's  Dictionaire  du  commerce, 
de  Vindustrie  et  de  la  hanque,'\  the  following  steps  must 
be  taken  before  the  approval  is  given.  The  change 
must  be  submitted  to  the  Ministry  of  Public  Works 
and  posted  for  one  month.  It  is  referred  to  the  prefects 
of  the  various  departments  or  provinces  traversed  by 
the  railroad,  and  is  then  submitted  with  reports  of  the 
prefects  to  the  inspector-general  of  control.  The 
change  suggested  is  also  referred  to  chambers  of  com- 
merce and  other  commercial  bodies  that  may  be  inter- 
ested; it  is  inserted  in  the  official  journal;  it  is  examined 
by  various  railroad  inspectors,  and  by  engineers  in 
charge  of  navigable  streams,  ports  and  mines  in  the 
region  concerned;  and  finally  comes  for  decision  before 
the  Consultative  Railroad  Commission.  Even  then  as  a 
rule  only  provisional  approval  is  given,  in  order  to  per- 
mit the  ministry  later,  if  it  so  desired,  to  cancel  the 
change.  The  grant  of  provisional  approval  was  at  first 
held  to  be  illegal  by  the  railroads;  but  in  practice  few 
if  any  changes  in  rates  have  been  made  by  the  Govern- 
ment, through  this  power,  without  the  initiative  of  the 
companies.  The  delay  in  procuring  the  authority  to 
change  rates  is  so  great  that  in  the  case  of  export  and 
transit  rates  some  simplification  of  procedure  is  per- 
mitted. Outside  of  France,  with  its  consolidated  rail- 
way systems,  lack  of  competition,  comparatively  slow 
industrial  change,  and  extensive  system  of  waterways; 
so  inelastic  a  system  of  rates  would  be  intolerable. 

The  changes  in  rates  described  can  take  place  only 
within  fixed  maximum  limits,  which  since  1859  have 
been  uniform  for  all  railroads.  These  maximum  rates 
show  separately  tolls  and  charges  for  transportation. 
Care  was  taken  to  reserve  for  social  purposes  further 
control  in  certain  cases.     For  example,  the  maximum 

t  See  also  Kaufmann:  La  politique  francaise  en  matiere  de 
chemins  de  fer  (translated  from  the  German). 

161 


rate  on  grain  (including  tolls  and  transportation 
charges)  was  fixed  at  14  centimes  per  metric  ton  per 
kilometer;  but  if  the  price  of  wheat  exceeds  20  francs 
per  hectoliter,  the  Government  may  temporarily  reduce 
the  freight  rate  one-half  (to  7  centimes  per  ton  kilo- 
meter). 

The  three  leading  features  of  French  railroad  history 
are:  (1)  Enormous  State  grants,  aggregating  at  the 
close  of  1901,978,000,000  francs,  of  which  only  23,000,- 
000  francs  have  been  returned,  leaving  nearly  955,- 
000,000  francs  or  $184,000,000  still  outstanding. 
(2)  Complete  private  monopoly  of  railroad  transporta- 
tion. (3)  Rigorous  governmental  control  of  rates, 
which  nevertheless  has  not  prevented  much  higher 
rates  than  are  in  force  in  Germany,  Austria  or  Hungary 
and  80  per  cent  above  those  in  the  United  States. 

Austria-Hungary. — At  first  Austria  attempted  to 
follow  the  French  system  of  a  radiating  system  of  lines 
from  the  capital,  to  be  constructed  by  private  enter- 
prise with  State  aid  and  subject  to  complete  govern- 
mental control  of  rates.  The  system  proved  unsuited 
to  Austrian  conditions.  Vienna  is  not  the  economic 
center  of  Austria  as  Paris  is  that  of  France.  Moreover 
the  heavy  export  trade  required  cheap  long-distance 
rates  that  proved  unprofitable.  Railway  lines  were 
taken  over  by  the  Government  and  new  State  lines 
were  built  until  in  1854  two-thirds  the  mileage  of  the 
country  was  under  governmental  ownership.  Then 
followed  a  period  during  which  State  lines  were  sold,  at 
a  great  sacrifice,  to  private  companies.  In  1874  but 
eight  miles  were  retained  by  the  Government.  The 
crisis  of  1873,  causing  decreased  earnings  and  conse- 
quent heavy  payments  of  guaranteed  receipts  and 
dividends  by  the  State,  once  more  changed  the  national 
railway  policy.  The  example  of  Prussia  also  contrib- 
uted, doubtless,  to  the  policy  of  State  acquisition.     In 

162 


1902,  out  of  a  total  of  12,409  miles,  the  State  owned 
4,874  miles  and  operated  in  all  7,405  miles — 60  per  cent 
of  the  total.  Industrial  and  political  conditions  have 
prevented  the  exaction  of  rates  sufficiently  high  to 
permit  the  payment  of  interest  charges  without  a  con- 
siderable contribution  of  State  funds.  The  railway 
system  constitutes  a  burden  of  about  65,000,000 
crowns  (over  $13,000,000)  annually  on  the  tax  payers, 
according  to  the  British  Diplomatic  and  Consular 
Reports  (annual  series  No.  3343,  p.  39). 

During  the  first  period  of  railway  construction,  the 
independence  of  Hungary  in  internal  affairs  had  not 
been  secured  and  Hungarian  roads  were  subject  to 
Austrian  control.  After  1867  the  desire  of  the  new 
Hungarian  Government  to  promote  stronger  nationality 
made  it  favorable  to  State  ownership  of  railroads;  as 
in  Austria,  the  crisis  of  1873  operated  in  the  same 
direction.  The  movement  has  gone  further  in  Hungary 
than  in  Austria.  In  1902,  4,772  miles  were  owned  by 
the  State,  4,200  miles  of  private  roads  were  operated  by 
the  State,  and  only  1,848  miles,  17  per  cent  of  the  total, 
were  under  private  management. 

The  so-called  "zone  tariff"  was  introduced  in  Hun- 
gary in  1889,  and  had  for  its  effect  the  cheapening  of 
long-distance  travel  and  traffic  as  compared  with  short 
distance.  This  scheme  is  peculiarly  applicable  to  a 
country  like  Hungary  which  exports  large  quantities  of 
raw  products  and  where  long  distances  must  be 
traversed  by  bulky  goods.  But  the  criticism  that  im- 
ported goods  are  likewise  unduly  favored  was  not  want- 
ing, t  The  zone  tariff,  slightly  modified,  was  later 
adopted  by  Austria. 

t  See  Ulrich:  Tarifs  de  chemins  de  fer,  pp.  150-151. 

163 


In  Hungary,  as  in  Austria,  insufficient  receipts  have 
necessitated  drawing  upon  the  public  treasury  to  meet 
a  deficit.  The  British  report  already  quoted  says 
(p.  99): 

''The  consequences  of  cheap  tariffs  is,  therefore, 
that  the  State  is  forced  to  cover  from  other  sources 
of  income  the  deficits  in  the  interest  payable  on 
the  railway  loans.  As,  however,  these  low  tariffs 
are  in  many  instances  an  essential  condition  of 
profitable  production,  it  is  impossible  for  the 
repeated  movements  toward  raising  the  tariffs 
to  be  successful.  Every  such  attempt  is  defeated 
by  the  vigorous  and  prompt  opposition  of  the 
representatives  of  commerce,  industry  and  trade, 
backed  up  by  the  agricultural  interest." 

Italy. — The  early  railroads  of  Italy  were  discon- 
nected lines  owned  by  the  local  States.  The  roads  had 
been  built,  managed  and  operated  under  all  forms  of 
State  participation.  The  construction  of  the  connecting 
links,  necessary  for  thorough  traffic,  was  prevented  by 
local  jealousy. 

With  the  nationalization  of  Italy  these  connecting 
lines  were  built.  Consolidation  was  thus  greatly 
facilitated.  Four  principal  systems  were  formed  by 
the  consolidation  of  competing  lines  within  a  given 
area,  not  of  connecting  lines.  Through  traffic  was  not 
developed,  the  lines  became  an  excessive  burden  on  the 
State  through  its  guarantee  of  earnings,  and  in  1870- 
1876  they  were  taken  over  by  the  Government.  The 
lines  were  temporarily  leased  to  private  companies 
until  the  State  should  be  in  a  position  to  operate  them. 

In  the  meantime  the  Commission  of  1878  was  insti- 
tuted to  investigate  the  best  means  of  procedure.  The 
Commission  made  a  most  exhaustive  inquiry*.  Its 
work  extended  over  two  or  three  years:  an  enormous 
amount  of  information  was  collected  in  regard  to  con- 

*  Professor  Hadley,  on  p.  219,  declared  that  it  was  "the  most 
thorough  railroad  investigation  ever  made  in  the  world." 

164 


ditions  both  in  Italy  and  abroad:  its  report,  in  seven 
volumes,  covers  every  phase  of  governmental  regula- 
tion, ownership  and  operation  of  railroads.  The 
remarkably  varied  relations  between  the  State  and  the 
railroads  that  have  prevailed  in  Italy  give  especial 
weight  to  its  conclusions,  which  are  summarized  by 
Professor  Hadley  (p.  253)  as  follows: 

"The  State  is  more  apt  to  tax  industry  than  to 
foster  it;  and  when  it  attempts  to  tax  industry,  it 
is  even  less  responsible  than  a  private  company. 
Second,  State  management  is  more  costly  than, 
private  management,  and  a  great  deal  of  capital  is 
thus  wasted.  Third,  political  considerations 
are  brought  into  a  system  of  State  management  in 
a  way  which  is  disastrous  to  legitimate  business, 
and  demoralizing  to  politics.^' 

This  report,  emphasized  by  the  actual  experiences 
that  followed  State  acquisition  and  an  unsuccessful 
attempt  to  manage  one  system,  led  to  the  leasing  of 
the  lines  to  three  companies,  two  of  which  controlled 
separate  trunk  lines  traversing  Italy  from  northwest  to 
southeast.  These  companies  were  to  furnish  the  rolling 
stock;  certain  proportions  of  the  gross  receipts  were  to 
constitute  reserves  for  extraordinary  repairs  and 
renewals  of  rails  and  rolling  stock,  and  a  variable 
percentage  of  the  remainder,  decreasing  somewhat 
with  increased  earnings,  was  to  be  retained  for  expenses 
and  profits.  While  the  contracts  made  are  doubtless 
open  to  criticism,  the  arrangement  was  on  the  whole 
probably  as  satisfactory  as  could  have  been  made, 
since  outright  sale  to  private  companies  was  out  of  the 
question.  The  average  freight  rates,  while  still  high, 
show  a  marked  decline  after  the  new  plan  went  into 
effect.  The  average  charge  in  1872  was  1.95  cents  per 
ton-mile,  in  1880  1.97  cents,  and  in  1890  1.64  cents. 
The  subsequent  reduction  to  1.58  cents  in  1899  was 
about  as  great  as  could  be  expected,  since  the  private 

165 


incentive   to   expand   traffic    by   lowering   charges    is 
limited. 

The  leasing  contracts  were  made  for  sixty  years,  but 
provided  that  either  party  might  terminate  them  at 
the  end  of  twenty  or  forty  years.  The  financial  results 
have  been  unsatisfactory.  Instead  of  yielding  a 
revenue  the  railroads  have  for  several  years  been  an 
expense  to  the  State.  In  1901  the  deficit  was  nearly 
$2,000,000,  although  the  net  receipts  of  the  companies 
amounted  to  $13,000,000.  The  Government,  unable  to 
have  the  contracts  amended  as  it  desired,  has  denounced 
them,  to  take  effect  this  year. 

Germany. — Germany  represents  the  policy  of  State 
ownership  more  conspicuously  than  any  other  country 
of  the  first  rank.  ***** 

By  extensive  State  ownership  and  by  stringent  con- 
trol over  private  lines  the  Government  now  dominates 
the  entire  railroad  system  in  Germany.  That  State 
ownership  has  been  more  successful  in  Germany  than 
elsewhere  is  generally  admitted.  Although  high  com- 
pared with  those  in  the  United  States,  the  average  rates 
in  force  there  are  lower  than  elsewhere  in  Europe, 
with  the  exception  of  Russia,  where  the  vast  distances 
traversed  render  low  mileage  rates  imperative.  But, 
unlike  the  Russian  roads,  those  of  Germany  are  profit- 
able, although  the  percentage  of  net  receipts  to  cost 
of  construction  is  gradually  declining. 

The  general  tariff  in  force  is  simple  in  principle.  * 
The  rate  is  made  up  of  two  factors,  a  despatch  fee 
increasing  slightly  with  the  distance  up  to  100  kilo- 
meters (about  62  miles)  and  a  mileage  charge,  decreas- 
ing in  rate  with  increased  distance.  The  ordinary 
tariffs  comprise,  in  addition  to  the  less-than-carload 
rate  and  the  express  rate  (double  the  former)  Class  Al 
(shipments  of  not  less  than  5  metric  tons)  and  Glass  B 

*  Pauer:  Lehrbuch  des  Eisenbahn-Tarifwesens,  p.  320. 

166 


(not  less  than  10  metric  tons).  There  are  besides  four 
special  classes  applicable  to  articles  specified  in  the 
tariff.  One  of  these  classes  included  shipments  of 
between  5  and  10  metric  tons  (Class  A2)  and  the  other 
three  classes  (Classes  I,  II,  III),  shipments  of  not  less 
than  10  metric  tons.  Class  I  is  supposed  to  include  in 
general  higher-priced  articles,  such  as  manufactures, 
Class  II  semi-manufactured  articles,  and  Class  III  low- 
priced  goods,  such  as  raw  products.  Grain,  however, 
apparently  to  protect  German  farmers,  is  included  in 
Class  I. 

But  the  special  rates  are  further  reduced  by  granting 
so  called  ''preferential  rates,"  which  are  described  as 
''applicable  to  agricultural  and  industrial  products, 
and  intended  to  assist  and  facilitate  imports  and 
exports,  and  increase  the  traffic  of  the  country." 
According  to  a  recent  British  official  report  on  "Prussian 
Railways"  f  no  less  than  63  per  cent  of  the  total  ton- 
mileage  is  despatched  under  the  preferential  rates, 
while  the  special  rates  cover  17  per  cent,  and  the 
ordinary  rates  only  20  per  cent. 

Some  flexibility  thus  exists  under  the  German 
system.  But  examples  quoted  in  the  British  report 
referred  to  show  clearly  that  these  reductions  are 
more  frequently  made  for  political  than  for  economic 
reasons.    The  instances  cited  fall  under  six  heads. § 

1.  As  bounties  to  certain  districts. 

2.  As  export  bounties. 

3.  For  competition  with  foreign  transport. 

4.  To  support  special  important  industries,  such  as 
the  ship-building  industry,  the  Silesian  textile  indus- 
tries, and  the  beet-sugar  industry,  by  conveying  their 
raw  materials  at  cheap  rates. 

tDiplomatic  and  Consular  Reports,  Miscellaneous  series  No. 574. 
§  Abstracted  from  the  British  Report  on  Prussian  Railways, 
pp.  15-16. 

167 


5.  As  a  special  fuel  tariff. 

6.  For  the  alleviation  of  distress  due  to  bad  harvests, 
floods,  etc. 

In  the  report  of  the  Industrial  Commission*  several 
examples  are  given  of  petitions  demanding  the  reduc- 
tion of  rates  to  favor  certain  special  interests  that  read 
like  arguments  for  special  favors  in  the  adjustment  of 
tariff  duties,  with  the  exception  that  a  protective 
tariff  discriminates  against  foreign  industry  only, 
while  preferential  railroad  rates  often  discriminate 
against  domestic  producers.  If  the  examples  were  not 
cited  by  a  writer  highly  commendatory  of  the  Prussian 
system  they  would  appear  to  have  been  given  in  order 
to  show  the  great  danger  of  State  interference  in 
industry.        ******* 

Conclusions. — In  tracing  briefly  Government  con- 
trol and  ownership  in  the  leading  countries  of  Europe, 
certain  conclusions  seem  unavoidable. 

(1)  Stringent  control,  as  in  the  United  Kingdom, 
and  France,  tends  to  prevent  the  reduction  of  rates. 
Without  the  ability  to  raise  rates  to  their  former  level, 
experiments  in  lowering  rates  in  order  to  build  up 
traffic  are  not  likely  to  be  freely  made. 

(2)  A  comparison  of  freight  rates  on  the  railroads  of 
Europe,  operated  or  controlled  by  the  State,  with 
those  in  force  in  the  United  States,  proves  that  the 
latter  have  not  only  reached  a  much  lower  level  of 
rates  but  show  a  much  more  rapid  decline.  In  Russia, 
only,  the  rates,  while  higher,  are  somewhat  comparable 
with  those  in  the  United  States.  In  1890  the  average 
Russian  rate  per  ton-mile  was  1.14  cents  and  in  1900 
0.84  cents.     But  the  low  rates  in  Russia,  necessitated 

*  Vol.  IX,  pp.  980-983. 

168 


by  the  long  distances  covered,  frequently  by  goods  for 
exportation,  were  accompanied  by  rapidly  diminished 
net  earnings  per  mile,  and  an  absence  of  profits. f 

While  the  average  passenger  rates  are  lower  abroad 
than  in  this  country,  the  service  is  usually  so  inferior  as 
to  make  the  comparisons  valueless.  But  freight  traffic 
is  vastly  more  important  than  passenger  travel.  The 
following  table  shows  average  freight  rates: 

AVERAGE    FREIGHT  CHARGES  PER  TON  PER  MILE  (cents) 


^^ 

TJ  m 

CD 

>> 

« 

>> 

03  ^^ 

9i  03 

u 

>> 

•S  2? 

i 

S3 

O 

3 

< 

3 

^1 

1870 

1.89 

1.78 

al.95 

1S80 

1.23 

1.68 

1.81 

1.97 

1890 

.94 

1.54 

1.34 

1.39 

1.38 

1.64 

1.14 

1891 

.90 

1   51 

1.33 

1.36 

1.28 

1.63 

1.06 

1892 

.90 

1.51 

1.33 

1.33 

1.25 

1.63 

.95 

1893 

.88 

1.48 

1.32 

1.32 

1.25 

1.63 

.99 

1894 

.86 

1.47 

1.32 

1.31 

1.25 

1.63 

1.00 

1895 

.84 

1.45 

1.32 

1.30 

1.24 

1.63 

.98 

1896 

.81 

1.44 

1.32 

1.32 

1.27 

1.63 

.95 

1897 

.80 

1.42 

1.29 

1.27 

1.26 

1.63 

.89 

1898 

.75 

1.39 

1.27 

1.23 

1.25 

1.60 

.86 

1899 

.72 

1.35 

1.24 

1.22 

1.27 

1.58 

.87 

1900 

.73 

1.32 

1.22 

1.24 

1.25 

6 

.84 

1901 

.75 

1.33 

1.23 

1.24 

1.26 

b 

1902 

.76 

1.33 

1.22 

1.26 

1.24 

b 

a  For  1872.     b  Data  not  comparable  with  earlier  years. 

(3)  But  the  higher  charges  on  the  European  railways 
have  not  resulted  in  profits.  Where,  as  in  Russia, 
Austria  and  Hungary,  the  rates  are  lower  than  in  most 
other  continental  countries,  a  deficit  has  occurred. 
Germany  might  be  held  up  as  an  instance  w^here  State 
ownership  and  Government  rate-making  have  not  yet 
caused  a  drain  on  the  State  treasury.     But  attention 

t  Commercial  Russia  in  Monthly  Summary  of  Commerce  and 
Finance,  Feb.,  1904,  p.  2762. 

169 


has  already  been  directed  to  the  fact  that  since  popular 
demands  have  caused  reductions  in  the  rate  schedules, 
the  net  earnings  constitute  a  decreasing  percentage  of 
the  cost  of  construction.  Where  private  management 
prevails,  decreases  in  rates  go  hand  in  hand  with 
greater  financial  success  on  the  part  of  the  rail- 
roads; but  under  State  control,  political  rather  than 
economic  necessity  frequently  reduces  rates,  thus 
benefiting  individual  interests  at  the  expense  of  the 
general  body  of  tax  payers.  Even  where  the  higher 
rates  obtain,  however,  as  in  France  and  Italy,  the 
financial  results  to  the  State  are  very  unsatisfactory. 
The  profits  of  the  private  managers  of  companies  are 
thoroughly  safeguarded,  while  the  State  receives  a 
very  meager  return  for  its  large  advances. 

(4)  Private  ownership  and  operation,  without 
excessive  legislative  restrictions,  appear  to  be  necessary 
in  order  to  obtain  the  utmost  economy  in  railway 
management.  The  conclusion  is  supported  by  the 
results  of  the  exhaustive  investigation  made  by  the 
Italian  Railway  Commission,  and  is  admitted  by  the 
great  majority  of  students  of  railway  policy.  Only 
resp  Dnsibility  to  stockholders  is  a  sufficient  incentive  to 
insure  that  changes  in  rates,  improvements  in  service, 
equipment  and  tracks,  and  extension  of  line  shall  be 
made  whenever  they  may  reasonably  be  expected  to 
cause  an  appropriate  increase  in  profitable  traffic  and 
not  under  other  conditions. 

(5)  The  greatest  danger  perhaps  from  Stkte  par- 
ticipation in  rate-making  is  the  substitution  of  political 
for  economic  considerations  in  the  determination  of 
charges.  Low  freight  charges  on  international  traffic 
under  all  forms  of  management  are  frequently  guaran- 
teed by  competition  between  rival  routes.  But  when 
the  national  desire  to  foster  export  trade  is  added,  the 
incentive  to  increase  shipments  abroad  becomes  too 

170 


strong,  and  frequently  results  in  the  establishment  of 
unremunerative  rates  that  constitute  a  burden  on 
internal  traffic.  Under  general  State  ownership  com- 
petition as  a  means  of  determining  rates  is  abrogated. 
Even  indirect  competition,  which  prevents  a  monopoly 
on  the  part  of  private  carriers  from  charging  more 
"than  the  traffic  will  bear,"  loses  much  of  its  power 
when  responsibility  to  private  stockholders  is  ex- 
changed for  responsibility  only  to  the  public.  With 
the  withdrawal  of  competition  as  a  force  in  determining 
rates,  political  pressure  on  the  part  of  certain  classes 
becomes  too  strong  an  influence.  In  Germany  this 
danger  is  especially  conspicuous.  There  two  strong 
interests,  the  agrarians  and  the  industrial  class,  have 
succeeded  in  obtaining  a  protective  railway  tariff  as 
well  as  a  protective  customs  tariff. 

High  rates,  without  generally  favorable  financial 
results;  more  costly  management;  the  delegation  of 
rate  control  to  persons  more  amenable  to  political 
influence  than  business  necessity — these  .are  the  most 
conspicuous  results  of  European  railway  policy. 

All  of  which  is  respectfully  submitted. 


H.  T.  NEWCOMB. 


Washington,  D.  C,  July  8,  1905, 
Bond  Building. 


171 


INDEX 

PAGE 

A  Rigid  System 129 

A  Successful  Statute 124-125 

Accident  and  Guaranty  Companies  as  Railway  Owners 86,  87 

Act  to  Regulate  Commerce,  Knapp,  M.  A.,  on 124,  125 

Acworth,  W.  M 155 

Acworth,  W.  M.,    on  Rate-making 17,  18 

Acworth,  W.  M.,  on  Regulation  in  England 23,  24 

Advance  in  Rates 97-100 

Advance  in  Rates,  Hay 103-106 

Advances  in  Classificatio.i 99 

Agricultural  Implements,  Rates 49 

Agricultural  Products  and  the  Ton-mile  Unit 38 

American  and  Foreign  Railroads,  Leroy-Beaulieu,  on 10 

Anniston  Rates 31 

Any  Rate  and  All  Rates 131 

Apples,  Prices,  1899,  1903 61 

Apples,  Rates  and  Prices,  1897,  1905 9 

Atlanta  and  Rome  Rates 95 

Atlanta  Journal  on   Georgia  Rate-making 21-22 

Atlanta  Rates 31,  46-50 

Australia's  Lesson 29 

Austria,  Ton-mile  Rates,  1870-1902 169 

Austria-Hungary,  Railways  in 162-164 

Babbitt.  B.  T.  Co.,  on  Rate-making 137-139 

Bacon,  E.  P.,  on  Elki:  s  Law 91,  92 

Bacon,  E.  P.,  on  Expert  Knowledge 19 

Bacon,  E.  P.,  on  Mileage  Basis 28 

Bacon,  Rates  and  Prices,  1897,  1905 9 

Banks  and  Railway  Securities .  .  .81-83 

Barley  and  Its  Equivalent  in  Railway  Service 64 

Beans,  Prices,  1899,  1903 61 

Beans,  Rates  and  Prices,  1897,  1905 9 

Beef,  Prices,  1899,  1903 61 

Behlmer  Case 108 

Betterment  and  Capitalization 72 

Betterment  and  Earnings .70 

Betterments 77,  78 

Black  Death 30 

Blacksmiths'  Wages,  1899,  1903 67 

173 


INDEX 

PAGE 

Boiler  Makers'  Wages,  1899,  1903 67 

Bonds 72,  73 

Bonds  and  Earnings 70 

Bonds  Held  by  Accident  and  Guaranty  Companies 87 

Bonds  Held  by  Educational  Institutions 88 

Bonds  Held  by  Fire  Insurance  Companies.  . .86 

Bonds  Held  by  Life  Insurance  Companies 85 

Bonds  Owned  by  Banks ^ 82 

Bounty  and  Rate  Regulation  in  Germany 28 

Bread,  Prices,  1899,  1903 61 

Breadstuffs,  Cost  of,  1899-1903 63 

Bricklayers'  Wages,  1899,  1903 67 

Buckwheat  and  Its  Equivalent  in  Railway  Service 64 

Building  Materials,  Prices,  1890-1903 60 

Butter  Dishes,  Wooden 14 

Butter,  Prices,  1899,  1903 61 

Butter,  Rates  and  Prices,  1897.  1905 9 

Canadian  Rate  Regulation 22-23 

Canned  Goods'  Rates 47,  48 

Capital,  Timidity  of,  and  Rate  Fixing 139 

Capital,  Timidity  of,  France 160 

Capitalization 71,  72 

Capitalization,  1880,  1903 72,  73 

Capitalization,  America 76 

Capitalization  and  Mileage 72,  73 

Capitalization,  England 76 

Capitalization,  France 76 

Capitalization,  Germany 76 

Capitalization,  Necessity  for  Increased 76 

Carpenters,  Number  and  Wages,  1903 66 

Carpenters'  Wages,  1899,  1903 67 

Cartage  Case Ill 

Cattle  and  the  Equivalent  in  Railway  Service 64 

Cattle  Raisers'  Case 114 

Chattanooga  Case 108,  116 

Chattanooga  Rates 31 

Cheese,  Prices,  1899,  1903 61 

Cheese,  Rates  and  Prices,  1897,  1905 9 

Chicago  Basis  and  Western  Rates 10 

Chicago  New- York  Rate  Basis 44 

Chicago  Rates 48 

Chickens,  Prices,  1899,  1903 61 

Cincinnati  Rates 48 

174 


INDEX 

PAGE 

Circumstances,  Dissimilarity  of,  and  Long  and  Short  Haul 

Clause 115 

Class  Rates,  Southern 46 

Classification,  1887,  1902 43 

Classification,  Geographical 39,  40,  41,  51 

Classification  Rates 48 

Classification  Rates,  1900 99 

Classification,  Reductions  in 42,  43 

Clements,  Commissioner,  on  Unsustained  Cases 113 

Clothing,  Cost  of,  1899-1903 63 

Clothing,  Prices,  1890-1903 60,  61 

Coal  and  Earnings 70 

Coal  and  the  Ton-mile  Unit 38 

Coal  Rates 109 

Coffee,  Prices,  1899,  1903 9,  61 

Colorado  Fuel  and  Iron  Case 110 

Commerce,  Development  of.  Experimental  Rates  and 147 

Commerce  Should  be  Left  Free  from  Fettering  Laws 18 

Commercial  Forces  and  Rates 11,  52-53 

Commercial  Freedom  and  Railway  Rate-making 11-15 

Commercial  Law  and  Politics 25,  31 

Commercial  Law  and  Remedial  Legislation 11,  12 

Commercial  Law  and  Sumptuary  Legislation 30 

Commission  Defeated  Repeatedly  in  the  Courts 109,  110 

Commission  Derelict  says  the  Court 109 

Commission  Wrong  on  the  Facts 112-114 

Commission's  Duty  to  Decide  on  the  Facts 107,  108 

Commission's  Misfit  Reply 101-103 

Commodities  and  their  Equivalent  in  Railway  Service 64 

Commodities,  Increased  Purchasing  Power  of 64,  65,  66,  67 

Commodities  will  Buy  More  Railway  Service  than  in  1899. .  .  .60,  61 

Commodity  Rates 50 

Commodity  Rates,  Southern 47 

Company  Freight 98 

Competition  and  Rate-fixing 141 

Competition  and  Rates 18,  19,  20 

Competition,  Commercial 12,  31 

Competition  Controls 19 

Competition  of  Markets 12,17 

Complaints  are  Inevitable 126,  127 

Complaints,  Number  of 120,  121 

Compositors'  Wages,  1899,  1903 67 

Concentration  of  Rate-makin-?  Power,  Effects  of  ..20,  21,  141,  144 
Conductors,  Number  and  Wages,  1903 56 

175 


INDEX 

PAGE 

Congress  and  the  Rate-making  Power 141,  142 

Constitution  and  Rate-making  Power 130,  131 

Control     and     Ownership 79,  83 

Coolej^  Judge,  on  Official  Rate-m^aking 131,  132 

Corn  and  Equivalent  in  Railway  Service 64 

Corn  Meal,  Prices,  1899,  1903 61 

Corn  Production,  1880,  1890,  1900,  1905 35,  36 

Corn,  Rates  and  Prices,  1897,  1905 9 

Cost  of  Operation,  1899,  1903 54 

Cost  of  Operation  and  Earnings 70 

Cost  of  Operation  and  Wages,  1895-1903 69 

Cost  of  Railway  Service  and  Cost  of  Commodities 62,  63 

Cost  of  Railway  Service,  Decrease 62-63 

Cost  of  Transportation 63,  64,  135 

Cost  of  Transportation  and  Rates 33 

Cotton  Crop  Report  and  Government  Control 149,  150 

Cotton  Goods,  Rates  and  Prices,  1897,  1905 9 

Cotton  Production,  1880,  1890,  1900,  1905 35 

Courts  and  the  Commission 107,  108,  109,  110,  112-114 

Cowan,  S.  H.,  on  Competition 19 

Cowan,  S.  H.,  on  Esch-Townsend  Bill 127 

Cows  and  Equivalent  in  Railway  Service 64 

Coxe  Case 113 

Dairy  Products,  Cost  of,  1899-1903 63 

Day's  Labor,  A,  Will  Buy  More  Railway  Service 67-68 

Decline  in  Rates 101 

Declining  Railway  Freight  Rates 39,  40 

Depositors  in  Banks,  Number  of 81 

Depositors  in  Savings  Banks  as  Railway  Owners 81-83 

Depression,  Railway,  Effect  of 146,  147 

Deprivation  of  Property,  without  Due  Process  of  Law 146 

Development  and  Complaints 126 

Development  of  the  United  States  and  the  Railways 10,  12,  15 

Differentials 130,  131,  132,  145 

Differentials  and  Interstate  Commerce  Commission 148,  149 

Differentials  and  Politics 31 

Discriminations 89-91,  92,  138 

Discriminations  and  the  Elkins  Law 119 

Discriminations  in  Government  Rate-fixing 141 

Discrimination  in  Localities  and  Government  Regulation 27 

Dissimilarity   of   Circumstances   and   Long   and   Short    Haul 

Clause 115 

Distance  Tariffs  Would  Result 142,  143 

176 


INDEX 

PAGE 

Dividends,  1888-1903 74 

Dividends,  1903 68 

Dividends  and  Earnings 70 

Dividends  and  Interest  Do  Not  Increase  Railway  Charges 73 

Dividends  and  Rates 73 

Document  No.  257 36-38,  95-7,  98,  100,  101,  103 

Document  No.  257  Unfair 106,  107 

Drugs,  Prices,  1890-1903 58,  60 

Dun's  Index    Numbers    show    Decreased    Cost    of    Railway 

Service 62-63 

Earnings  and  Betterment 70 

Earnings  and  Bonds 70 

Earnings  and  Cost  of  Operation 70 

Earnings  and  Dividends 70 

Earnings  and  Interest 70 

Earnings  and  Stock 70 

Earnings  and  Surplus 70 

Earnings  and  Taxes 70 

Earnings,  Distribution  of 69-70 

Earnings,  Gross,  1903 69 

Economic  Friction  in  Railway  Business .' 10,  11 

Economic  Law  and  Remedial  Legislation 125,  126 

Educational  Institutions  as  Railway  Owners 87,  88 

Effect  of  the  Decreased  Purchasing  Power  of  Money 51-52 

Eggs,  Prices,  1899,  1903 61 

Eggs,  Rates  and  Prices,  1897,  1905 9 

Elasticity  in  Rate-making,  Necessity  of 11,  12,  19,  25 

"Elements  of  Railway  Economics,"  by  W.  M.  Acworth.17,18,23,24 

Elkins,  Stephen  B.,  on  Excessive  Rates 68 

Elkins  Law,  1903 89,  92,  117-120 

Emergency  Rates 12-15 

Eminent  Domain  and  Rate-fixing 138 

Employees,  Railway,  1893-1903 77,  78 

Employees,  Railway,  1893,  1894,  1903 147 

Employees,  Railway,  and  Proposed  Legislation 134,  135,  136 

Employees,  Railway,  and  Railway  Depression 147 

Employees,  Railway,  Number  of 134 

Employees,  Railway,  Number  of,  1893-1903 71 

Employees,  Railway,  Number  and  Wages,  1903 66 

Engineers,  Number  and  Wages,  1903 66 

England,  Government  Regulation  in 23,  24 

Environment's  Subtle  Influence 94,  95 

Esch-Townsend  Bill 127 

177 


INDEX 

PAGE 

Esch-Townsend  Bill,  Locomotive  Engineers,  on 136 

Esch-Townsend  Bill  and  Rebates 128 

"Etats  Unis  au  XXe  Siecle  " 10 

Europe,  Railways  in 158 

Europe's  Lesson 24 

European  Railways,  Private  Ownership 170 

Evading  Its  Duty 108 

Experimental  Rates .    12,  15 

Expert  Knowledge  Necessary  in  Rate-making 19 

Exports,  1880,  1890,  1900,  1903 35 

Facts,  Interstate  Commerce  Commission  and  the.  .  .107,  108,  109, 

112, 114 

Farm  Products,  Prices,  1890-1903 58,  60 

Farm  Products  will  Buy  More  Railway  Service 64 

Farmers'  Savings  from  Reduced  Rates 51 

Fire  Insurance  Companies  as  Railway  Owners 85,  86 

Firemen,  Number  and  Wages,  1903 66 

Fish,  Prices,  1899,  1903 61 

FlexibiUty  of  Rates 11,  12,  137, 140,  167 

Flood  of  Litigation  Would  Follow 146 

Flour,  Prices,  1899,  1903 61 

Flour,  Rates 49 

Flour,  Rates,  1800-1903 45 

Flour,  Rates  and  Prices,  1897,  1905 9 

Food  Prices,  1890-1903 58,  60 

Food  Products,  Cost  of,  1899-1903 63 

Foreign  View,  A 10 

"Forty-year  Review  of  Changes  in  Freight  TariflFs" 43 

France,  Railways  in 158-162 

France,  Ton-mile  Rates,  1870-1902 169 

Freedom  of  American  Railroads,  Leroy-Beaulieu  on 10 

Freight  Bureau  Cases 31,  122,  123 

Fuel,  Cost  of,  1899,  1903 55 

Fuel  Prices,  1890-1903 58,  60 

Fuel,  Proportion  to  Revenue 55 

Funded  Debt,  Interest  on 68,  70 

Funded  Debt,  Interest  on,  1892-1903 75 

Garden  Products,  Cost  of,  1899-1903 63 

Genesis  of  the  Interstate  Commerce  Law 89-91 

Geographical  Classification 39,  40,  41,  51 

Georgia  Commission  Cases 108,  1 15 

Georgia  Railroad  Jim  Crow  Case Ill 

178 


INDEX 

PAGE 

Georgia  State  Regulation  of  Rates 21-22 

Germany,  Government  Regulation  in 166-168 

Germany,  Railroads  in 166-168 

Germany,  Ton-mile  Rates,  1870-1902 169 

Glassware  Rates 47,  49 

Glucose  Rates 47,  49 

Government  Control,  Austria-Hungary 162,  163 

Government  Control,  France 159,  160,  162,  168 

Government  Control,  Germany 166-168 

Government  Control,  Italy 164,  165 

Government  Control,  United  Kingdom 153-167 

Government  Control  and  Experimental  Rates 15 

Government  Ownership 22,  23,  149-153 

Government  Ownership,  Canada 22,  23 

Government  Rate-making  and  Flexibility  of  Rates 12 

Government  Rate-making  Inelastic 140,  141 

Government  Receipts  and    Expenditures,  1880,   1890,  1900, 

1903 35,  36 

Government  Regulation,  Australia 29 

Government  Regulation  and  Discrimination  Between  Local- 
ities   27 

Government  Regulation  and  Private  Enterprise 139 

Grain  Rates 53 

Grain  Rates,  German 27-28 

Great  Reductions  to  the  South 46-50 

Griffin  Case 117 

Hadley,  A.  T.,  on  Effect  of  Dividends  on  Rates 73 

Hadley,  A.  T.,  on  Government  Control  in  Italy 165 

Hadley,  A.  T.,  on  Increase  of  Rates 66 

Hadley,  A.  T.,  on  Massachussetts  Railroad  Commission 140 

Hadley,  A.  T.,  on  Purchasing  Power  of  Money 52 

Hadley,  A.  T.,  on  Watered  Stock 73 

Hadley,  A.  T.,  on  "What  the  Traffic  Will  Bear" 15,  16 

Hats,  Rates  and  Prices,  1897,  1905 9 

Hay 103-106 

Hay  and  its  Equivalent  in  Railway  Service 64 

Hay,  Prices,  1899,  1901 105,  106 

Hay,  Rates  and  Prices,  1897,  1905 9 

Hay,  Tonnage,  1902 104 

High-grade  Freight,  Increase  in 38 

Hod  Carriers'  Wages,  1899,  1903 67 

Hogs  and  the  Equivalent  in  the  Railway  Service 64 

Horses  and  the  Equivalent  in  Railway  Service 64 

179 


INDEX 

PAGE 

House  Furnishings,  Prices,  1890-1903 58,  60 

Hudson  River  Ice  Crop 12 

Hungary,  Railroads  in 163,  164 

Hungary,  Ton-mile  Rates,  1870-1902 169 

Ice,  Rates,  188^1890 12 

Illinois  Central  R.  R.  Co.  Stock 80 

Import  Rates  Case 107,  108,  114 

Importance  of  the  Question 141,  142 

Imports,  1890,  1900,  1905 35 

Income,  Railway,  Distribution  of 69,  70 

Increase  in  Rates 55,  56 

Increase  of  High-grade  Traffic 36-38 

Increased  Use  of  Railway  Transportation 34,  35,  36 

Increases  in  Rates  would  Result 145,  146 

Increasing  Cost  of  Railway  Operation 53-55 

Industrial  Commission  Report,  1900 , 98 

Industrial  Insurance,  Railway  Securities 84 

Industrial  Revolution 10 

Industries,  Building  Up  of 12-15 

Inequalities  Pending  Fixing  of  All  Rates j 140,  141 

Informal   Complaints 120,    121 

Injunctions  and  Rebates 117,  118 

Intercolonial  Railway 22 

Interest  and  Earnings 70 

Interest  and  Rates 73 

Interest  on  Funded  Debt,  1892-1903 75 

Interest  on  Funded  Debt,  1903 68,  70 

International    Railway   Congress 136,    137 

Interstate  Commerce  Act,  Adequate  Judicial  Interpretation  of  .146 

Interstate  Commerce  Commission  and  Complaint 120-121 

Interstate  Commerce  Commission  and  Concentration  of  Rate- 
making    Power 21,    141 

Interstate  Commerce   Commission   and  Differentials.  ..  .148,    149 
Interstate  Commerce  Commission  and  Enforcement  of  Present 

Law 91 

Interstate      Commerce      Commission     and     Rate-making 

Power 21.  133,   134 

Interstate    Commerce    Commission    and    the     Courts.  .107,  108, 

109.  110.  112-114 
Interstate  Commerce  Commission  and  the  Distance  Tariff.  .  .  .143 

Interstate  Commerce  Commission,  Changing  Personnel  of 31 

Interstate  Commerce  Commission,  Duties  of 109,  167,  16 

Interstate  Commerce  Commission  on  Elkina  Law 9 

180 


INDEX 

PAGE 

Interstate  Commerce  Commission  on  the  Ton-mile  Unit 36 

Interstate  Commerce  Commission,  Powers  of 119,  120 

Interstate  Commerce  Commission,  Propaganda  for  Increased 

Power 93,  94 

Interstate  Commerce  Commission  Report,  1900 97,  98 

Interstate  Commerce  Commission,  Statistics  of 95-97 

Interstate  Commerce,  Deyelopment  of 141,  142 

Interstate  Commerce    Law 89-91 

Interstate  Commerce  Law  and  Natural  Decline  in  Rates 25 

Intricacy  of  Rate-making 19 

Iron  Molders'  Wages,  1899,  1903 67 

Iron    Rates 47,  50 

It  is  General   Rate-making 133,  134 

Italy,  Railroads  in 164-166 

Italy,  Ton-mile  Rates,  1870-1902 169 

Joint  Rates,  Wheat,  1800-1903 45 

Kansas  Corn 13 

Kearney  Case 108,  113 

Kerosene  Oil,  Rates  and  Prices,  1897,  1905 9 

Kirkman,  Marshall  M.,  on  Remedial  Legislation 125,  126 

Knapp,  Martin  A.,  on  Excessive  Rates 68 

Knapp,  Martin  A*,  on  Interstate  Commerce  Act 124,  125 

Knoxville  Rates 31 


Labor,  Increased  Purchasing  Power  of 67,  68 

Laborers'  Wages,  1899,  1903 67 

Lamb,  Prices,  1899,  1903 61 

Land  Frauds  and  Government  Enterprise 151 

Lard,  Prices,  1899,  1903 9,  61 

Law  Against  Rebates 117,  118 

Law  of  Rates 16 

Law  of  the  Land 124 

Laws  of  Trade 16 

Ledyard,  H.  B.,  on  Rebates 127-128 

Legislation,  Adequacy  of  Existing 83 

Legislation  and  Rebates 128,  129 

Legislation  and  the  Laws  of  Commerce 12,  30 

Legislation  as  a  Panacea 125,  126 

Legislation,  Enforcement  of 130 

Legislation,  New,  Necessity  for  Judicial  Interpretation  of 146 

Legislation  not  Necessary 135 


181 


INDEX 

PAGE 

Leroy-Beaulieu,  Pierre 10 

Lesson  from  Experience 148,  149 

Let  there  be  no  False  Pretences 128 

Life  Insurance  Companies  as  Railway  Owners 84,  85 

Liquor  Rates 47 

Litigation  and  Rate-fixing 146 

Location,  Natural  Advantages  of 116,  117 

Locomotive  Engineers  on  Esch-Townsend  Bill 136 

Lodge,  H.  C,  on  Port  Differentials 132 

Long  and  Short  Haul  Cases 114-117 

Louisville,  Ky.,  Rates 48 

Low-grade  Freight 17-18 

Low-grade  Freight  and  the  Ton-mile  Unit 36-38 

Lumber,  Prices,  1890-1903 58,  60 

Lumber  Rates 53 

Lust  of  Power 93,  94 

Machinists,  Number  and  Wages,  1903 66 

Machinists'  Wages,  1899,  1903 67 

Machinery,  Improved 10 

Maintenance,  Expenditure  for,  1893-1903 77,  78,  79 

Malt  Liquor  Rates 60 

Manufacturers'  Protest  Against  Rate-fixing 137-139 

Markets,  Competition  of * 12,  17 

Marietta  Rates 21 

Massachusetts  Railroad  Commission 140 

Maximum  Rate  Case 95,  142 

Maximum  Rates,  France 161 

Maximum  Rates,  United  Kingdom 154,  155 

Meats,  Cost  of,  1899-1903 63 

Meats,  Rates 49 

Memphis  Rates 48 

Metals,  Cost  of,  1899-1903 63 

Metals,  Prices,  1890-1903 68,  60 

Meyer,  Hugo  R.,  on  Effects  of  Government  Regulation 25 

Meyer,  Hugo  R.,  on  Government  Regulation  in  Australia 29 

Meyer,  Hugo  R.,  on  Regulation  in  Europe 24 

Mileage  and  Capitalization 72,  73 

Mileage  Basis  for  Rates 28,  142,  143 

Mileage,  European 158 

Mileage,  Increase  in 11 

Mileage  Rates  Condemned 28 

Milk.  Prices  1899,  1903 61 

Minimum  Rates 146 

182 


INDEX 

PAGE 

Mischief  Will  Follow 147 

Mischievous  Meddling,  but  with  Good  Intentions .  .    ........  ^Sl 

Misleading  Statistics 100,  101 

Missouri  Pacific  Railway  Case 119 

Molasses,  Prices,  1899,  1903 61 

Molasses  Rates 47,  50 

Money,  Amount  in  Circulation,  1880,  1890,  1903 35,  36 

Money  Purchasing  Power,  Decrease  in 51-52 

"Monthly  Summary  of  Commerce  and  Finance  of  the  U.  S."...62 

Moseley,  Edward  A.,  Circular  to  Trade  Organizations 93-94 

Mules  and  the  Equivalent  in  Railway  Service 64 

Mutton,  Prices  1899,  1903 61 

Nashville  Coal  Case 109 

National  Banks,  Capital  of,  1880,  1890,  1903 35,  36 

Natural  Decline  in  Rates  Stopped  in   England  by  Legisla- 
tion  23,  24 

Necessity  for  the  Investment  of  More  Capital 75,  76 

New  Haven  Journal  on  Canadian  Rate  Regulation 22,  23 

Newcomb,  H.  T.,  Railways  in  Foreign  Countries 153-171 

Newspapers,  1880,  1890,  1900,  1903 35 

Nominal  Advance  in  Rates  was  Unavoidable 55,  56 

Oatmeal  Rates 47,  49 

Oats,  Rates  and  Prices,  1897,  1905 9 

Official  Rate-making  in  Georgia 21-22 

One  Effect  of  Railway  Depression 146,  147 

Operation,  Cost  of 102 

Orange  Routing  Case Ill 

Order  of  Railway  Conductors  on  Proposed  Railway  Legisla- 
tion  134,  135 

Orders  of  the  Commission  and  Enforcement 124 

Orders  of  the  Commission,  Contested 110-112 

Orders  of  the  Commission,  How  Obeyed 122,  123 

Orders  of  Commission  Not  Sustained  by  the  Courts 109-110 

Ore  Rates 12,  13 

Over-Capitalization 72 

Ownership  and  Control 79,  83 


Pains  of  Industry 126,  127 

Painters'  Wages,  1899,  1903 67 

Party  Rate  Case Ill 

Passenger  Mileage,  1880-1903 34 

183 


INDEX 

PAGE 

Passenger  Mileage,  1899,  1903 54,  55 

Passenger  Rate  Cases 58,  60,  61,  111 

Patents,  Number  Issued,  1880,  1890,  1900,  1903 35 

Personal  Equation  and  Rate-making 94,  95 

Philadelphia  Board  of  Trade 130 

Pickles,  Rates 47 

Plumbers'  Wages,  1899,  1903 67 

Policies,  Fire,  Railway  Securities 85,  86 

Politics  and  Rate- making 24 

Policy  Holders,  Life,  Railway  Securities 85,  86 

Political  Demoralization 24 

Political  Rate-making  in  Germany 27-28 

Politics  and  Government  Ownership 1  70 

Politics  and  Rate- making 15 

Politics  Would  Supplant  Economics 31 

Pooling 89 

Population  and  Transportation  per  capita,  1880-1903 34,  35 

Pork,  Prices,  1899,  1903 61 

Pork,  Rates,  and  Prices,  1897,  1905 9 

Port  Differentials 31 

Port  Differentials  Would  be  Illegal ^ 130,  131 

Post  Office  Scandal  and  Government  Management 161 

Post  Offices.  Number  of,  1880,  1890,  1900,  1903 36 

Potatoes  and  the  Equivalent  in  Railway  Service 64 

Potatoes,  Prices  1899,  1903 61 

Potatoes,  Rates  and  Prices,  1897,  1905 9 

Preference  Clause  and  Differentials 130,  131,  146 

Preferential  Rates 167 

Present  Effectiveness  of  the  Commission 120-123 

Present  Law  has  Hindered  Reductions. , 25,  26 

Present  Law  is  Adequate 83 

Prices  and  Rates 9,  57-9,  CO,  61,  65,  135 

Prices  and  Rates,  1899-1903 62,  63,  64 

Prices  and  Rates,  Hay 104,  106,  106 

Prices  not  Affected  by  Rates 9 

Prices.  Wholesale,  1897,  1905. 9 

Private  Enterprise  and  Government  Regulation 139 

Private  Ownership,  European  Railways 170 

Propaganda  of  Commission  for  Increased  Power 93,  94 

Prosperity,  Railway 70,  71 

Prouty,  C.  A.,  on  Rigidity  of  Rates 129 

Prouty,  C.  A.,  on  Unsustained  Cases 113 

Prunes,  Prices,  1899,  1903 61 

Public,  The,  Gets  the  Benefit  of  Improved  Methods 33 

184 


INDEX 

PAGE 

Radial  System,  Austria 162 

Radial  System,  France 162 

"Railroad  Transportation,"  by  A.  T.  Hadley 15,  16 

Railway  and  Canal  Traffic  Act,  1894 155 

Railway  Bonds  Which  Earn  Nothing 75 

Railway  Capitalization 71,  72 

Railway  Charges  not  Taxes 32-33 

Railway  Conductors  in  Opposition 134,  135 

Railway  Employees  and  Railway  Prosperity 70,  71 

Railway  Income  and  What  Becomes  of  it 69,  70 

Railway  Officers  Work  for  Shippers 16 

Railway  Ownership  Dififused 79,  80 

Railway  Prosperity  and  Quality  of  Service 77,  79 

Railway  Rates  and  Wages 66 

Railway  Rates  Have  Not  Advanced 97-100 

Railway  Securities  and  Fire  Insurance 85-86 

Railway  Securities  and  Accident  Companies 87 

Railway  Securities  and  Educational  Institutions 87 

Railway  Service  and  Cost  of  Breadstuffs,  1899-1903 63 

Railway  Service  and  Cost  of  Dairy  Products,  1899-1903 63 

Railway  Service  and  Cost  of  Clothing,  1899-1903 63 

Railway  Service  and  Cost  of  Commodities 62,  63,  64 

Railway  Service  and  Cost  of  Food  Products,  1899-1903 63 

Railway  Service  and  Cost  of  Garden  Products,  1899-1903 63 

Railway  Service  and  Cost  of  Meats,  1899-1903 63 

Railway  Service  and  Cost  of  Metals,  1899-1903 63 

Railway  Service  and  Other  Industries,  1880,  1890,  1900, 1903  .35,  36 

Railway  Service,  Barley  and  Equivalent  in 64 

Railway  Service,  Buckwheat  and  Equivalent  in 64 

Railway  Service,  Cattle  and  Equivalent  in 64 

Railway  Service,  Corn  and  Equivalent  in 64 

Railway  Service,  Cows  and  Equivalent  in 64 

Railway  Service,  Hay  and  Equivalent  in 64 

Railway  Service,  Hogs  and  Equivalent  in 64 

Railway  Service,  Horses  and  Equivalent  in 64 

Railway  Service,  Mules  and  Equivalent  in 64 

Railway  Service,  Oats  and  Equivalent  in 64 

Railway  Service,  Potatoes  and  Equivalent  in 64 

Railway  Service,  Rye  and  Equivalent  in 64 

Railway  Service,  Sheep  and  Equivalent  in 64 

Railway  Service,  Wheat  and  Equivalent  in 64,  65 

Railway  Service  Purchasable  by  a  Day's  Labor — 

Blacksmiths'    Wages,  1899,  1903 67 

Boilermakers'  Wages,  1899,  1903 67 

185 


INDEX 

Railway  Service  Purchasable,  etc. — Continued.  page 

Bricklayers'      Wages,  1899,  1903 67 

Carpenters'       Wages,  1899,  1903 67 

Compositors'    Wages,  1899,  1903 67 

Hod  Carriers'  Wages,  1899,  1903 .67 

Iron  Holders'  Wages,  1899,  1903 67 

Laborers'  Wages,  1899,  1903 67 

Machinists'       Wages,  1899,  1903 67 

Painters'  Wages,  1899,  1903 67 

Plumbers'         Wages,  1899,  1903 67 

Stonecutters'    Wages,  1899,  1903 67 

Stonemasons'  Wages,  1899,  1903 67 

Railway  Stock  Which  Earns  Nothing 74 

Railways,  American,  Value  of 71,  72 

Railways  and  Development  of  the  United  States , 11-15 

Railways  do  not  Control  Rates 20,  21 

Railways  in  Foreign  Countries 183,  171 

Railways  Opposed  to  Rebates 127,  128 

Rate  and  Rates 133 

Rate-fixing  and  Competition 141 

Rate-fixing  and  Increase  in  Rates > 145 

Rate-fixing  and  Politics 170 

Rate-making  and  the  Constitution 130,  131 

Rate-making  and  Timidity  of  Capital 139 

Rate-making,  Cooley,  T.  M.,  on 131,  132 

Rate-making,  Difficulties  of 131,  132,  149 

Rate-making,  Expert  Knowledge  Necessary 19 

Rate-making  Power 133,  134 

Rate-making  Power  and  Rebates 128 

Rate-making  Power  and  Rigidity  of  Rates 129 

Rate-making  Power  and  the  Commission 122 

Rate-making  Power  and  Voluntary  Reductions 143,  145 

Rate-making  Power,  Importance  of 142 

Rate-making  Power,  Philadelphia  Board  of  Trade  on 130 

Rate- making  Power,  Taylor,  W.  D.,  on 131 

Rate  Reductions  and  Traffic  Men 144 

Rate  Regulation  and  Limitation  of  Market 29 

Rate  Regulation  and  Politics 24 

Rate-revising  and  Rate-making 142 

Rates,  1897,  1905 9 

Rates,  1890-1903 58,  60,  61 

Rates,   American  and  English 156 

Rates,  American  and  European 159,  168 

Rates,  American  and  Foreign 135 

186 


INDEX 

PAGE 

Rates  and  Commercial  Forces 11,  52,  53 

Rates  and  Competition 18,  19,  20 

Rates  and  Dividends 73 

Rates  and  Interest 73 

Rates  and  Money  Value 52 

Rates  and  Prices 9,  65,  135 

Rates  and  Prices,  1890-1903 57,  59,  60,  61 

Rates  and  Prices,   1899-1903 62,  63,  64 

Rates  and  Volume  of  Traffic 18.  40-42 

Rates  and  Wages 66,  67 

Rates,  Basis  of 137 

Rates,  Experimental 147 

Rates,  Flexibility  of 11,  12,  137,  140 

Rates,  Increase  in,  1899,    1903 95-97 

Rates,  Increase  of,  and  Rate-fixing 145 

Rates,  International  Railway  Congress  on 137 

Rates,  Law  of 16 

Rates,   Natural  Decline  in,  and  Government  Regulation, 

United  Kingdom 155,  166 

Rates,  Nominal  Advance  in 56,  66 

Rates,  not  Excessive 34,  68.  145 

Rates,  Passenger,  American  and  Foreign 169 

Rates  per  Ton-mile 33 

Rates  Prior  to  1887 26 

Rates,  Reductions,  1890,  1895,  1899 51,  53 

Rates,  Relation  Between 145 

Rates,  Since  1887 .• 26 

Rates  the  Traffic  will  Bear 15,  16,  17,  18 

Rates,    Voluntary    Reduction    of 143-145 

Rates  which  do  Not  Affect  Retail  Prices 9,  10 

Real  Power  in  Inverse  Ratio  to  Statutory  Power 140 

Rebates : 89-91,  92,  117,  118,  128 

Rebates  and  Legislation 128,  129 

Rebates  no  Longer  General 91-93 

Rebates,   Railways   Opposed   to 127,  128 

Recapitulation    of    Railway    Ownership    Data 88,  89 

Receipts,  Passenger- mile,  1899,  1903 55 

Receipts   per  Ton-mile,    1899 41,  42,  54,  55 

Receipts  per  Unit  of  Service 39,  40 

Recent  Evidence  on  Government  Enterprise 149-153 

Reductions  in  Rates 51,  53 

Reductions  in  the  Classification  of  Freight 42-43 

Regulation   of   Wages   by   Parliament 30 

Relation  of  Capitalization  to  Mileage 72,  73 

187 


INDEX 

PAGE 

Remedial    Legislation 125,     126 

Return  on  Railway  Investments 68 

Revenue,    Freight,    1899-1903 97-101 

Revenue,  Increase  in,  1899,  1903 95-97,  106,  107 

Revenue,  Increase  in,  from  Hay 104 

Rice,  Prices,  1899,  1903 61 

Rome  and  Atlanta  Rates 95 

Rome  Rates 31 

Roosevelt,  President,  on  Elkins  Law 91 

Roosevelt,  President,  Railway  Conductors,  on  Message  of .  .  .  .135 

Routing Ill 

Russia  (European),  Ton-mile  Rates,  1870-1902 169 

Rye  and  Equivalent  in  Railway  Service 64 

St,  Louis  Rates 48 

Salaries  and  Wages,  1895,  1903 69 

San  Bernardino  Case 113,  115 

Savings  Banks  and  Railway  Securities 81-83 

Securities,  Railway  and  Accident  and  Guaranty  Companies .  .86-87 

Securities,  Railway,  and  Educational  Institutions 88 

Securities,  Railway,   and  Life   Insurance  Companies 84,  85 

Securities,    Railway,    and   Savings    Banks 81-83 

Securities,  Railway,  Distribution  of 88 

Selma  Rates 31 

Service,  Quality  of 77-79 

Shareholders,  Number  of 79,  80 

Shares,  Railroad,  Owned  by  Banks ".  .82 

Sheep  and  Equivalent  in  Railway  Service 64 

Shippers   and   Rate-making 16,  20 

Shippers  and  TraflSc  Men 17 

Shipping,  American,  1880,  1890,  1900,  1903 35,  36 

Shoes,  Rates  and  Prices,  1897.  1905 9 

Soap  Manufacturers  and  Rate-making 137-139 

Soap  Rates 47,  60 

Social  Circle  Case 107,   122 

Some  Contested  Decisions  of  the  Commission 110-112 

Standard  for  Measuring  the  Trend  of  Rates 25 

State  Operation,  Leroy-Beaulieu  on 10 

State  Railroad  Commissions 21-22,  140,  141 

Station  Agents,  Number  and  Wages,  1903 66 

Statistics,  Misleading 96,  97,  100,  101 

Stevens,  F.  C,  on  Esch-Townsend  Bill 140,  141 

Stock 72,   73 

Stock  and  Earnings 70 

188 


INDEX 

PAGE 

Stock  held  by  Accident  and  Guaranty  Companies 87 

Stock  held  by  Educational  Institutions 88 

Stock  held  by  Fire  Insurance  Companies 86 

Stock  held  by  Life  Insurance  Companies 85 

Stock,  Small  Holders  of 80 

Stock,  Unremunerative,  1888-1903 74 

Stonecutters'  Wages,  1899,  1903 67 

Stone  Masons'  Wages,  1899,  1903 67 

Sufficiency  of  the  Elkins  Law 118-120 

Sugar,  Prices.  1899,  1903 61 

Sugar  Rates 53 

Sugar,  Rates  and  Prices,  1897,  1905 9 

Sumptuary  Legislation  is  not  New 30 

Supreme  Court  and  the  Commission 107,  108 

Supreme  Court  on  Rate-making  Power 133,  134 

Surplus  and  Earnings 70 

Sweet  Gum-wood  Articles 14 

Syrup  Rates 50 

Taft,  W.  F.,  Address  at  International  Railway  Congress 137 

Tariffs,  Filed,  Number  of 19,  20 

Taxation,    Nature    of 32-33 

Taxes  and  Earnings 70 

Taylor,  W.  D.,  on  Law  of  Rates 16 

Taylor,  W.  D.,  on  Natural  Adjustment  of  Rates 147 

Taylor,  W.  D.,  on  Rate-making  Power 131 

Tea,  Prices  1899,  1903 61 

Tea,  Rates  and  Prices,  1897,  1905 9 

Telegraph,  Operators,  Number  and  Wages,  1903 66 

Telegrams,  Number  sent,  1880,  1890,  1900,  1903 35 

"  Tempering  the  Wind  to  the  Shorn  Lamb" 17,  18 

Terminal  Charges,  United  Kingdom 154 

There  would  be  Few  Voluntary  Reductions  in  Rates.  .  .  .143-145 

Through  Rates 149 

To  Abolish  Port  Differentials 132 

Ton-mile,  1860,  1870,  1905 11 

Ton-mile  Basis 106,  107 

To^-mile  Rates,  1870-1885 33 

Ton-mile  Rates,  1870-1902 169 

Austria. 169 

France 169 

Germany 169 

Hungary 169 

Italy 169 

189 


INDEX 

Ton-Mile  Rates  1870-1902 — Continued.  page 

Russia  (European) 169 

United  States ., 169 

Ton-mile  Rates,  1890-1905 33 

Ton-mile  Rates,  1899-1903 97 

Ton-mile  Rates,  1899,  1903 96 

Ton-mile  Unit,  Stability  of 36 

Ton-mileage,  1880-1903 34 

Ton-mileage,  1899,  1903 41 

Ton-mileage,  1903. 51,  107 

Ton-mileage,  1899-1903 101 

Ton  Unit  of  Service 106 

Traffic    Increases    Greatest    where    Ton-mile    Receipts    are 

Highest 40-42 

Traffic   Men   and  Rate   Reductions 12,  144 

Traffic  Men  and  the  Shippers 17 

Trainmen,  Number  and  Wages,  1903 66 

Transportation  a  Commodity  to  be  sold 11,  139 

Transportation  by  Water 25 

Transportation,    Cost    of 63,  64,  135 

Transportation,  Increased  Use  of 34,  35,  36 

Transportation  per  Capita  Population,  1880-1903 34,  35 

Transportation  Practices Ill 

"Transportation    Tax" 32,    33 

Treasury  Deficit  and  Government  Management 151 

Tuttle,  Lucius 17 

Typical  Recent  Reductions  in  Rates 52-53 

"United  States  in  the  Twentieth  Century" 10 

United  Kingdom,  Railways  in 153-157 

United  States,  Ton-mile  Rates,  1870-1902 169 

Usui-y  and  Sumptuary  Legislation 30 

Value  of  Freight,  1903 42 

Veal,  Prices  1899,  1903 61 

Veasey,  Wheelock  G.,  on  Fettering  Laws 18 

Vinegar,  Prices  1899,  1903 61 

Volume  of  Traffic  and  Rates 18.  40-42 

Wages 69 

Wages,  1899,  1903 54,  55 

Wages  and  Equivalent,  Railway  Service 67 

Wages   and   Income 54,    70 

Wages  and  Rates 66,   67 

190 


INDEX 

PAGE 

Wages  and  Salaries,  1895-1903 71 

Wages  and  the  Purchasing  Power  of  Money 52 

Wages,  Sumptuary  Legislation  and 30 

"Water"  Stock 72,  73 

Water  Transportation 25 

West-bound  Traffic  and  the  Ton-mile  Unit 38 

What    Has   Happened  in  Canada 22-23 

"What  the  Traffic  Will  Bear" 15,  16,  17,  18 

Wheat  and  Flour  Rates  Decline 44-45 

Wheat  and  Equivalent  in  Railway  Service 64,  65 

Wheat  Production,  1880,  1890,  1900,  1905 35,  36 

Wheat  Rates,  1880-1903 45 

Wheat,  Rates  and  Prices,  1897,  1905 9 

Wheat  Will   Buy  More  Railway  Service 65 

Wire  Rates 63 

Woolen  Goods,  Rates  and  Prices,  1897,  1905 9 

Would  Add  to  the  Incentive  for  Rebating 128-129 

Year  Book,  Department  of  Agriculture,  1903 64,  65 

Zone-tariff,  Hungary 163 


191 


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